Optimal Stabilization with Endogenous Firm Entry

Christopher Waller

No 621, 2009 Meeting Papers from Society for Economic Dynamics

Abstract: a¤ecting firm entry, the central bank deviates from the Friedman rule. Calibration ex-ercises suggest that the nominal interest rate should have been substantially smoother than the data if preference shocks were the main disturbance and much more volatile if productivity was the driving shock. This result is a direct consequence of policy actions to control entry.

Date: 2009
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