This paper presents a DGE model in which aggregate price level inertia is generated endogenously by the optimizing behaviour of price setting ?rms. All the usual sources of inertia are absent here ie., all fi?rms are simultaneously free to change their price once every period and face no...

This paper presents a DGE model in which aggregate price level inertia is generated endogenously by the optimizing behaviour of price setting firms. All the usual sources of inertia are absent here ie., all firms are simultaneously free to change their price once every period and face no...

Aggregate corporate profits are highly volatile and procyclical. Most dynamic general equilibrium models of the business cycle cannot deliver these basic features of the data. We develop a model of the U.S. economy in which firms expend resources to create intangible capital (IC), which is an...