The competition effect in business cycles : [Version 21 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 |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-240835 |
| URL: | http://www.imfs-frankfurt.de/fileadmin/user_upload/WP_2012_51.pdf |
| Parent Title (German): | Working paper series / Institute for Monetary and Financial Stability ; 51 |
| Series (Serial Number): | Working paper series / Institute for Monetary and Financial Stability (51) |
| Publisher: | Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability |
| Place of publication: | Frankfurt am Main |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2012 |
| Year of first Publication: | 2012 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2012/04/03 |
| Tag: | Bayesian estimation; business cycles; competition; entry; markups |
| Issue: | Version 21 März 2012 |
| Page Number: | 32 |
| HeBIS-PPN: | 311797504 |
| 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 |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
