In this paper, the authors study the dynamic behavior of a menu-cost economy where firms are heterogeneous. In this contex t, they generalize the Caplin and Spulber (1987) monetary-neutrality result; show that uniqueness of equilibria depends on the degree of dispersion of firms' positions in...

Investment is often irreversible: once installed, capital has little or no value unless used in production. This paper proposes and solves a model of sequential irreversible investment and characterizes the aggregate implications of macroeconomic irreversibility and idiosyncratic uncertainty. If...

The authors study positive and normative aspects of steady-state equilibrium in a market where firms of endogenous size experience idiosyncratic shocks and undergo a costly search process to hire workers. The model highlights interactions between job-security provisions and sectoral shocks in...