Arguments favoring Keynesian models over real business cycle models are often made on the grounds that the correlations and impulse response patterns found in the latter are inconsistent with the data. A recent and prominent example of this type of reasoning is Gali (1999). But such conclusions...

Arguments in favor of Keynesian models as opposed to real business cycle models are often made on the grounds that the correlations and impulse response patterns found in the latter are inconsistent with the data. A recent and prominent example of this reasoning is Gali (1999). But certain...

This paper studies the role of endogenous producer entry and product creation for monetary policy analysis and business cycle dynamics in a general equilibrium model with imperfect price adjustment. Optimal monetary policy stabilizes product prices, but lets the consumer price index vary to...