This paper proposes a monetary model with firm entry as a means for alleviating the difficulties of real business cycle models in reproducing the smoothness and persistence of macroeconomic variables together with the volatility of profits and markups. Simulations show that my baseline model...

What shocks account for the business cycle frequency and long run movements of output and prices? This paper addresses this question using the identifying assumption that only supply shocks, such as shocks to technology, oil prices, and labor supply affect output in the long run. Real and...