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Product scope and endogenous fluctuations
Recent empirical evidence suggests that product creation is procyclical and it occurs largely within existing firms. Motivated by these findings, the current paper investigates the role of intra-firm product scope choice in a general equilibrium economy with oligopolistic producers. It shows that the multi-product nature of firms makes the economy susceptible to sunspot equilibria. The model is estimated via Bayesian methods. Artificial business cycles closely resemble empirically observed fluctuations with sunspots explaining a significant portion of U.S. business cycles.
History
Publication title
Review of Economic DynamicsVolume
24Pagination
175-191ISSN
1094-2025Department/School
TSBEPublisher
Academic Press Inc Elsevier SciencePlace of publication
525 B St, Ste 1900, San Diego, USA, Ca, 92101-4495Rights statement
© 2017 Elsevier IncRepository Status
- Restricted