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Product Scope and Endogenous Fluctuations

Oscar Pavlov and Mark Weder

Review of Economic Dynamics, 2017, vol. 24, 175-191

Abstract: Recent empirical evidence suggests that product creation is procyclical and it occurs largely within existing firms. Motivated by these findings, the current paper investigates the role of intra-firm product scope choice in a general equilibrium economy with oligopolistic producers. It shows that the multi-product nature of firms makes the economy susceptible to sunspot equilibria. The model is estimated via Bayesian methods. Artificial business cycles closely resemble empirically observed fluctuations with sunspots explaining a significant portion of U.S. business cycles. (Copyright: Elsevier)

Keywords: Indeterminacy; sunspot equilibria; multi-product firms; business cycles; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11)

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DOI: 10.1016/j.red.2017.01.006

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