Theoretical models of strategic investments indicate that an incumbent firm by making pre-emptive capital investments may restrict an entrant's size and increase its market share, or deter entry. This paper focuses on the incentives of pre-emptive investments to show that upward and downward...

We build quadratic labor adjustment costs into an otherwise standard New-Keynesian model of the business cycle and show that this is sufficient to increase both, output and inflation persistence. -- Monetary persistence ; labor adjustment costs