Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/97714
Authors: 
Lewis, Vivien
Stevens, Arnoud
Year of Publication: 
2012
Series/Report no.: 
IMFS Working Paper Series 51
Abstract: 
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.
Subjects: 
Bayesian estimation
business cycles
competition
entry
markups
JEL: 
C11
E23
E32
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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