A note on firm entry, markups and the business cycle

Lilia Cavallari

Economic Modelling, 2013, vol. 35, issue C, 528-535

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 effect 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: Firm entry; Business formation; Business cycle; Macroeconomic dynamics; Markup fluctuations (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:35:y:2013:i:c:p:528-535

DOI: 10.1016/j.econmod.2013.07.039

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