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Firms' entry, monetary policy and the international business cycle

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  • Cavallari, Lilia

Abstract

This paper provides a theory of the international business cycle grounded on firms' entry and sticky prices. It shows that under simple monetary rules pro-cyclical entry and counter-cyclical markups can generate fluctuations in macroeconomic aggregates and trade variables as large as those observed in the data while at the same time providing positive international comovements. Both firms' entry and sticky prices are essential for reproducing the synchronization of the business cycles found in the data.

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  • Cavallari, Lilia, 2012. "Firms' entry, monetary policy and the international business cycle," MPRA Paper 41876, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:41876
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    More about this item

    Keywords

    firm entry; international business cycle; international comovements; variable markup; Taylor rule; exchange rate regimes;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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