On Quality and Variety Bias in Aggregate Prices

Hamano, Masashige; Zanetti, Francesco

doi:10.1111/jmcb.12476

Cited by 8 publications

(4 citation statements)

References 58 publications

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“…Hamano and Zanetti (2018) establish the relevance of quality and variety bias for aggregate prices in a model with firm entry and exit.…”

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confidence: 87%

Monetary Policy, Firm Heterogeneity, and Product Variety

Hamano¹,

Zanetti²

2021

SSRN Journal

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This study provides new insights on the allocative effect of monetary policy. It shows that contractionary monetary policy exerts a non-trivial reallocation effect by cleansing unproductive firms and enhancing aggregate productivity. At the same time, however, reallocation involves a reduction in the number of product variety that is central to consumer preferences and hurts welfare. A contractionary policy prevents the entry of new firms and insulates existing firms from competition, reducing aggregate productivity. Under demand uncertainty, the gain of the optimal monetary policy diminishes in firm heterogeneity and increases in the preference for product variety. We provide empirical evidence on US data, which corroborates the relevance of monetary policy for product variety that results from firm entry and exit, and provides limited support to the cleansing effect of monetary policy.

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“…Hamano and Zanetti (2018) establish the relevance of quality and variety bias for aggregate prices in a model with firm entry and exit.…”

mentioning

confidence: 87%

Monetary Policy, Firm Heterogeneity, and Product Variety

Hamano¹,

Zanetti²

2021

SSRN Journal

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“…Since our model abstracts from quality upgrading, it fails to account for this important channel that surely entails relevant welfare effects. In a recent paper,Hamano and Zanetti (2017) develop a model with quality upgrading and endogenous entry and exit of firms that can be extended to study the welfare effect of a fall in product destruction in the presence of quality upgrading. The investigation of this issue is certainly an interesting extension for future research.…”

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confidence: 99%

Endogenous product turnover and macroeconomic dynamics

Hamano

Zanetti

2017

Review of Economic Dynamics

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This paper introduces endogenous product entry and exit based on creation and destruction of product variety in a general equilibrium model. Recessionary technology shocks induce exit of unprofitable products on impact, allocating resources towards more productive production lines. However, during the recovery phase, less productive production lines survive destruction, counteracting the original increase in productivity. The analysis shows that recoveries hinge on lower product destruction rather than higher product creation. We find that product heterogeneity and the persistence of technology shocks play a critical role for the cyclicality of product turnover. Endogenous product destruction is important to evaluate the effect of permanent policies of entry deregulation and subsidies aimed to stimulate the economy.

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“…We follow Ghironi and Melitz (2005) and calibrate the elasticity of substitution between goods θ = 3.8 and the shape parameter of the productivity Pareto distribution κ = 3.4. As in Hamano and Zanetti (2018), we calibrate the steady state fixed costs f and the exogenous exit rate δ to match U.S. exit and entry rates. According to the Business Dynamics Statistics (BDS), average annual exit and entry rates were 10.…”

Section: Calibrationmentioning

confidence: 99%