Endogenous Entry, Product Variety, and Business Cycles

Macroeconomic Fluctuations and Firm Entry: Theory and Evidence

“…This contrasts with Bilbiie et al (2005), who assume that labour productivity a¤ects the production of goods and the production of …rms in the same way. See also Corsetti et al (2005), who make the same assumption as we do, but in an open economy setting.…”

“…For the US, the cyclical properties of net entry have been documented by Chatterjee and Cooper (1993), Devereux et al (1996) and Campbell (1997). Bilbiie et al (2005) show that net entry and pro…ts comove, and both are strongly procyclical. As shown in Figures 1 and 2 We replicate their exercise; the results and details of the VAR ordering are given in Figure 3.…”

“…Secondly, as shown in Bilbiie et al (2005) and Bergin and Corsetti (2005), endogenising the number of …rms adds an internal propagation mechanism to macroeconomic models, such that less persistence has to be imposed on exogenous shocks in order to generate realistic dynamics. In addition, optimal monetary policy has to be reconsidered.…”

“…To our knowledge, no other attempts have been made in the literature to analyse empirically the conditional properties of …rm entry. Our theoretical model is inspired by Bilbiie et al (2005).…”

Trade Integration and Business Cycle Synchronization in the EMU: The Negative Effect of New Trade Flows

“…First, we introduce an illustrative dynamic stochastic general equilibrium model following the recent literature on the extensive margin of international trade (Bilbiie et al, 2012;Corsetti et al, 2013). We find that the response of the cyclical component of output to a positive specific productivity shock depends on the variation in the terms of trade.…”