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Article
A note on firm entry, markups and the business cycle
Economic Modelling (2013)
  • Lilia Cavallari, University of Rome III
Abstract
This paper proposes a monetary model with firm entry as a means for alleviating the difficulties of real business cycle models in reproducing the smoothness and persistence of macroeconomic variables together with the volatility of profits and markups. Simulations show that my baseline model matches the unconditional moments of consumption, output, hours, markups and profits in US data fairly well. In addition, it implies a positive e¤ect of a monetary expansion on business formation as in the data. Allowing for differences in the composition of the investment and the consumption baskets is essential for these results.
Keywords
  • endogenous entry,
  • firm dynamics,
  • business cycle,
  • monopolistic competition,
  • market power
Disciplines
Publication Date
2013
Citation Information
Lilia Cavallari. "A note on firm entry, markups and the business cycle" Economic Modelling Vol. 35 (2013)
Available at: http://works.bepress.com/lilia_cavallari/16/