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...

The standard one-sector real business cycle model is unable to generate expectations-driven fluctuations. The addition of countercyclical markups and modest investment adjustment costs offers an easy fix to this conundrum. The simulated model generates quantitatively realistic business cycles...

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...

The standard one-sector real business cycle model is unable to generate expectations-driven fluctuations. The addition of countercyclical markups and modest investment adjustment costs offers an easy fix to this conundrum. The simulated model replicates the regular features of U.S. aggregate...

High degrees of relative risk aversion induces indeterminacy in cash-in-advance economies. In a small open economy context, this paper finds that endogenous money growth rules can pre-empt such sunspot equilibria in an open economy context. The most promising candidates are policies that...

This paper evaluates complementarities of labor market institutions and the business cycle in the context of a stochastic dynamic general equilibrium model economy. Matching between workers and vacancies with endogenous time spent in search, Nash-bargained wages, payroll taxation, and...

The article examines the proposition that preference shocks play a central role in our understanding of the Great Depression. I identify a series of unusually large negative shocks that destabilized the U.S. economy during the 1930s. When the artificial economy is paired with variable capital...

We show that an otherwise standard one-sector real business cycle model with variable capital utilization and mild increasing returns-to-scale is able to generate qualitatively as well as quantitatively realistic aggregate fluctuations driven by news shocks to two formulations of future...