This paper explores and quantifies the role of endogenous firm entry in amplifying and propagating shocks to the economy. To this end, we estimate two DSGE models on US data with Bayesian methods: one model with endogenous firm entry and translog preferences and one model without. Both models...

A recent theoretical literature highlights the role of endogenous firm entry as an internal amplification mechanism of business cycle fluctuations. The amplification mechanism works through the competition and the variety effect. This paper tests the significance of this amplification mechanism,...

We study business cycles with cyclical returns to scale. Contrary to tightly parameterized production functions (Cobb-Douglas and Constant Elasticity of Substitution), we empirically identify strong input complementarity that leads to procyclical returns to scale. We therefore propose a flexible...

This paper examines the implications of segmented assets markets for the real and nominal effects of monetary policy. I develop a model, in which varieties of consumption bundles are purchased sequentially. Newly injected money thus disseminates slowly through the economy via second-round...

How do changes in market structure affect the US business cycle? We estimate a monetary DSGE model with endogenous firm/product entry and a translog expenditure function by Bayesian methods. The dynamics of net business formation allow us to identify the "competition effect", by which desired...

A growing recent literature relies on a precautionary pricing motive embedded in representative agent DSGE models with sticky prices and wages to generate negative output effects of uncertainty shocks. We assess whether this theoretical model channel is consistent with the data. Building a New...

The two sector model presented in this note suggests a simple structural decomposition of movements in the price of investment goods into exogenous and endogenous sources. The endogenous fluctuations arise in the presence of countercyclical markups which vary differently across the consumption...

We characterize the dispersion of firm-level productivity and demand shocks using Swedish microdata including prices and utilization and analyse the consequences for firms and the aggregate economy. Demand dispersion increases by more than TFPQ dispersion in recessions. Productivity shocks pass...