Optimal Stabilization Policy with Endogenous Firm Entry
Project funded by own resources
Project title Optimal Stabilization Policy with Endogenous Firm Entry
Principal Investigator(s) Berentsen, Aleksander
Organisation / Research unit Departement Wirtschaftswissenschaften / Wirtschaftstheorie (Berentsen)
Project Website https://ideas.repec.org/p/fip/fedlwp/2009-032.html
Project start 01.01.2009
Probable end 31.12.2027
Status Active
Abstract

Monetary policy has significant but overlooked effects on entry and exit of firms. We study optimal monetary stabilization policy in a DSGE model with microfounded money demand and endogenous firm entry. Due to a congestion externality affecting firm entry, the optimal policy deviates from the Friedman rule in all states even though all prices are fully flexible. In contrast to previous Ramsey model with flexible price, our calibration exercises suggest that the model can generate a high volatility of the nominal interest rate which is a direct consequence of policy actions to control entry.

Financed by University funds

Published results ()

  ID Autor(en) Titel ISSN / ISBN Erschienen in Art der Publikation
3322148  Berentsen, Aleksander; Waller, Christopher  Optimal Stabilization Policy with Search Externalities  1365-1005  Macroeconomic Dynamics  Publication: JournalArticle (Originalarbeit in einer wissenschaftlichen Zeitschrift) 

Cooperations ()

  ID Kreditinhaber Kooperationspartner Institution Laufzeit - von Laufzeit - bis
2756837  Berentsen, Aleksander  Waller, Christopher  Federal Reserve Bank of St.Louis, USA, University of Notre Dame, USA  01.01.2009  31.12.2025 
   

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