This paper reviews the new economic geography literature, which accounts for the uneven distribution of economic activity across space in terms of a combination of love of variety preferences, increasing returns to scale and transport costs. After outlining the canonical core and periphery...

Although a rich and extensive body of theoretical research on new economic geography has emerged, empirical research remains comparatively less well developed. This paper reviews the existing empirical literature on the predictions of new economic geography models for the distribution of income...

Monetary policy affects the degree of strategic complementarity in firms pricing decisions if it responds to the aggregate price level. In normal times, when monopolistic competitive firms increase their prices, the central bank raises interest rates, which lowers consumption demand and creates...