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Variety matters
Countercyclical markups are a key transmission mechanism in many endogenous business cycle models. Yet, recent findings suggest that aggregate markups in the US are procyclical. The current model addresses this issue. It extends Galí's (1994) composition of aggregate demand model by endogenous entry and exit of firms and by product variety effects. Endogenous business cycles emerge with procyclical markups that are within empirically plausible ranges.
History
Publication title
Journal of Economic Dynamics and ControlVolume
36Pagination
629-641ISSN
0165-1889Department/School
TSBEPublisher
Elsevier Science BvPlace of publication
Po Box 211, Amsterdam, Netherlands, 1000 AeRights statement
Copyright 2011 ElsevierRepository Status
- Restricted