Firm entry, markups and the monetary transmission mechanism

Lewis, Vivien; Poilly, Céline

doi:10.1016/j.jmoneco.2012.10.003

Cited by 77 publications

(96 citation statements)

References 40 publications

(43 reference statements)

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“…The point estimate of µ p is close to the value of 1.22 reported in Lewis and Stevens (2015). However, it is significantly smaller than the value of 1.66 reported in Lewis and Poilly (2012). Regarding the competition and the variety effect, the point estimate of µ p implies that a one percent increase in the mass of firms lowers the price mark-up by 0.21 percent (the competition effect ξ) and raises the relative price by 0.13 percent (the variety effect ω).…”

Section: Parameter Estimatessupporting

confidence: 68%

“…Lewis and Poilly (2012) study the role of firm entry for the monetary transmission mechanism by minimizing the distance between the impulse responses to a monetary policy shock generated by a sticky price entry model and those obtained from a VAR. Lewis and Stevens (2015) estimate -as we do -a business cycle with firm entry using Bayesian methods.…”

Section: Introductionmentioning

confidence: 99%

“…8 However, Lewis and Poilly (2012) find that a model with strategic interactions cannot generate an empirically relevant competition effect. Therefore, we consider a demand-side driven competition effect based on a translog production technology.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Endogenous Firm Entry in an Estimated Model of the U.S. Business Cycle

Offick

Winkler

2017

Macroecon. Dynam.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may AbstractA recent theoretical literature highlights the role of endogenous firm entry as an internal amplification mechanism of business cycle fluctuations. The amplification mechanism works through the competition and the variety effect. This paper tests the significance of this amplification mechanism, quantifies its importance, and disentangles the competition and the variety effect.To this end, we estimate a medium-scale real business cycle model with firm entry for the U.S.economy. The competition and the variety effect are estimated to be statistically significant. Together, they amplify the volatility of output by 8.5 percent relative to a model in which both effects are switched off. The competition effect accounts for most amplification, whereas the variety effect only plays a minor role.JEL classification: E20, E32

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Section: Parameter Estimatessupporting

confidence: 68%

Section: Introductionmentioning

confidence: 99%

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Endogenous Firm Entry in an Estimated Model of the U.S. Business Cycle

Offick

Winkler

2017

Macroecon. Dynam.

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“…This strengthens competition and, via strategic interactions, reduces price markups. An early references on the procyclicality of the number of …rms'in the U.S. is Chatterjee and Cooper (1993), while a more recent one is Lewis and Poilly (2012). The countercyclicality of the price markup is consistent with the empirical …ndings by Bils (1987), Rotemberg and Woodford (2000) and Galì et al (2007).…”

Section: Introductionsupporting

confidence: 62%

Imperfect Competition and Optimal Taxation

Colciago

2013

SSRN Journal

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This paper provides optimal labor and dividend income taxation in a general equilibrium model with oligopolistic competition and endogenous …rms'entry. In the long run the optimal dividend income tax corrects for ine¢ cient entry. The dividend income tax depends on the form of competition and nature of the sunk entry costs. In particular, it is higher in market structures characterized by competition in quantities with respect to those characterized by price competition. Oligopolistic competition leads to an endogenous countercyclical price markup. As a result o¤set-ting the distortions over the business cycle requires deviations from full tax smoothing. JEL Classi…cation Numbers: E62, L13.

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“…This point is less important when I introduce staggered pricing and perform a quantitative analysis. 6 The relationship between monetary policy and firm creation is discussed in Bilbiie et al (2007), Bergin and Corsetti (2008), Lewis (2009), and Lewis and Poilly (2012).…”

mentioning

confidence: 99%

Monetary shocks, exchange rates, and the extensive margin of exports

Cooke

2014

Journal of International Money and Finance

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This paper develops a two-country Dynamic General Equilibrium model to assess the relationship between the real exchange rate and the extensive margin of exports. Exchange rate pass-through to consumer prices governs the relative strength of a demand channel onto the exporting decision of a firm. With incomplete passthrough, a favorable movement in the real exchange rate generates increased export participation and an expansion in the extensive margin of exports. This result is consistent with firm-level studies, and contributes to an ongoing empirical debate as to the importance of changes in export participation over the business cycle.

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Firm entry, markups and the monetary transmission mechanism

Cited by 77 publications

References 40 publications

Endogenous Firm Entry in an Estimated Model of the U.S. Business Cycle

Endogenous Firm Entry in an Estimated Model of the U.S. Business Cycle

Imperfect Competition and Optimal Taxation

Monetary shocks, exchange rates, and the extensive margin of exports

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