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 adresses this issue. It extends Gali's (1994) composition of aggregate demand model by endogenous...

Recent empirical evidence suggests that product creation is pro-cyclical and it occurs largely within existing firms. Motivated by these findings, the current paper investigates the role of intra-firm product scope choice in a general equilibrium economy with oligopolistic producers. We show...