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MODELLING ENTRY COSTS: DOES IT MATTER FOR BUSINESS CYCLE TRANSMISSION?

Lilia Cavallari ()

No 712, Working Papers from CREI Università degli Studi Roma Tre

Abstract: This paper studies the business cycle implications of entry costs in a dynamic stochastic general equilibrium model with firm entry and nominal rigidity. Simulations show that my baseline model matches the dynamics observed in the data fairly well. Remarkably, it overcomes the well-known di¢ culties of business cycle models in reproducing the persistence, smoothness and cyclicality of macroeconomic aggregates. I stress that capital entry costs are essential for these results.

Keywords: entry costs; firm entry; business cycle; investment costs. (search for similar items in EconPapers)
JEL-codes: E31 E32 E52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cmp, nep-dge and nep-mac
Date: 2012, Revised 2012
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Persistent link: https://EconPapers.repec.org/RePEc:rcr:wpaper:07_12

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