Endogenous Entry, International Business Cycles, and Welfare
Stéphane Auray and
Aurélien Eyquem ()
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Aurélien Eyquem: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - ENS de Lyon - École normale supérieure de Lyon - Université de Lyon - UL2 - Université Lumière - Lyon 2 - UCBL - Université Claude Bernard Lyon 1 - Université de Lyon - UJM - Université Jean Monnet - Saint-Étienne - CNRS - Centre National de la Recherche Scientifique
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Abstract:
This paper examines if taking into account changes in the number of producers, or equivalently changes in the product variety space over the business cycle, helps to understand and replicate international business cycle facts. To this end, we develop a two-country model in which the economy is driven by real and monetary policy shocks. If it is characterized by an endogenous number of firms and varieties, sticky prices and financial markets incompleteness. We show that these features are crucial to reproduce international business cycle statistics. We also evaluate the welfare implications of various monetary policies and highlight the importance for monetary policymakers to respond moderately to output fluctuations.
Keywords: International business cycles; Endogenous entry; Financial markets incompleteness; Sticky prices; Monetary policy; Welfare (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-cba and nep-mac
Note: View the original document on HAL open archive server: https://shs.hal.science/halshs-00581165v1
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Published in 2011
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Working Paper: Endogenous Entry, International Business Cycles, and Welfare (2011) 
Working Paper: Endogenous Entry, International Business Cycles, and Welfare (2011) 
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00581165
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