The competition effect in business cycles : [Version 9 März 2012]

  • How do changes in market structure affect the US business cycle? We estimate a monetary DSGE model with endogenous …rm/product entry and a translog expenditure function by Bayesian methods. The dynamics of net business formation allow us to identify the 'competition effect', by which desired price markups and inflation decrease when entry rises. We …find that a 1 percent increase in the number of competitors lowers desired markups by 0.18 percent. Most of the cyclical variability in inflation is driven by markup fluctuations due to sticky prices or exogenous shocks rather than endogenous changes in desired markups.

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Author:Vivien Lewis, Arnoud Stevens
Document Type:Report
Year of Completion:2012
Year of first Publication:2012
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2014/07/16
Tag:Bayesian estimation; business cycles; competition; entry; markups
Issue:Version 9 März 2012
Page Number:40
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
JEL-Classification:C Mathematical and Quantitative Methods / C1 Econometric and Statistical Methods: General / C11 Bayesian Analysis
Licence (German):License LogoDeutsches Urheberrecht