Business cycle models with sticky prices and endegenous firm entry make novel predictions on the transmission of shocks through the extensive margin of investment. This paper tests some of these predictions using a vector autoregression with model-based sign restrictions. We find a positive and...

This paper characterises optimal monetary policy in an economy with endogenous firm entry, a cash-in-advance constraint and preset wages. Firms must make profits to cover entry costs; thus the markup on goods prices is efficient. However, because leisure is not priced at a markup, the...

This paper studies the behaviour of firm entry and exit in response to macroeconomic shocks. We formulate a dynamic stochastic general equilibrium model with an endogenous number of producers. From the calibrated model, we derive a minimum set of robust sign restrictions to identify four kinds...