Endogenous Entry, International Business Cycles, and Welfare

Stéphane Auray and Aurélien Eyquem

Cahiers de recherche from Departement d'économique de l'École de gestion à l'Université de Sherbrooke

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. 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)
JEL-codes: E51 E58 F36 F41 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2011-03-31
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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http://gredi.recherche.usherbrooke.ca/wpapers/GREDI-1105.pdf This version, January 2011 (application/pdf)

Related works:
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:shr:wpaper:11-05

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