Monetary policy, productivity, and market concentration
Andrea Colciago () and
DNB Working Papers from Netherlands Central Bank, Research Department
This paper builds a New Keynesian industry dynamics model for the analysis of macroeconomic fluctuations and monetary policy. A continuum of heterogeneous firms populates the economy, markets are imperfectly competitive and nominal wages are sticky. An expansionary monetary policy shock triggers a response in labor productivity. By reducing borrowing costs, the shock initially attracts low productivity firms in the market. As a result, aggregate productivity decreases on impact. It then overshoots its initial level since, after the initial over-crowding, competition cleanses the market from low productivity firms. The overshooting amplifies the response of the main macroeconomic variables to the shock. A high ex-ante degree of market concentration partially impairs the transmission of monetary policy by disrupting the entry and exit mechanism.
Keywords: Market Concentration; Monetary Policy; Competition; Productivity (search for similar items in EconPapers)
JEL-codes: D42 E52 E58 L16 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Our link check indicates that this URL is bad, the error code is: 404 Not Found (https://www.dnb.nl/en/binaries/Working%20paper%20No.%20685_tcm47-388955.pdf [301 Moved Permanently]--> https://www.dnb.nl/en/binaries/working%20paper%20no.%20685_tcm47-388955.pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:dnb:dnbwpp:685
Access Statistics for this paper
More papers in DNB Working Papers from Netherlands Central Bank, Research Department Contact information at EDIRC.
Bibliographic data for series maintained by Richard Heuver ().