Monetary Policy with Endogenous Firm Entry and Sticky Entry Costs

Tommaso Mancini Griffoli ()
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Tommaso Mancini Griffoli: IUHEI, The Graduate Institute of International Studies, Geneva

No 09-2006, IHEID Working Papers from Economics Section, The Graduate Institute of International Studies

Abstract: This paper builds a monetary model where firm entry is endogenous, thereby exposing a new channel for the transmission of monetary policy. Individuals have a choice between consuming or investing in new firms by financing a sunk entry cost. Monetary policy shocks affect the cost-benefit analysis of creating new firms, and generate persistent as well as hump-shaped responses of consumption, investment, output and new firm entry, as observed in the data. These results lie on an endogenous source of inertia and are obtained despite minimal nominal rigidities, as only entry costs are assumed to be sticky.

Keywords: Monetary policy; firm entry; sunk entry costs; investment; sticky prices; New Keynesian models. (search for similar items in EconPapers)
JEL-codes: E37 E40 E52 L16 (search for similar items in EconPapers)
Pages: 42
Date: 2006-04
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:gii:giihei:heiwp09-2006

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