Variety matters

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Date

2012

Authors

Pavlov, O.
Weder, M.

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Journal article

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Journal of Economic Dynamics and Control, 2012; 36(4):629-641

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Oscar Pavlov, Mark Weder

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DOI

10.1016/j.jedc.2011.12.003

Abstract

Countercyclical markups are a key transmission mechanism in many endogenous business cycle models. Yet, recent findings suggest that aggregate markups in the US are procyclical. The current model addresses this issue. It extends Galí's (1994) composition of aggregate demand model by endogenous entry and exit of firms and by product variety effects. Endogenous business cycles emerge with procyclical markups that are within empirically plausible ranges. © 2011 Elsevier B.V..

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Copyright © 2011 Elsevier B.V. All rights reserved.

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https://doi.org/10.1016/j.jedc.2011.12.003

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http://hdl.handle.net/2440/72830