1989-01-01
Do small menu costs cause bigger and badder business cycles in monopolistic macroeconomies?
Publication
Publication
Journal of Macroeconomics
,
Volume 11
-
Issue 1
p. 25-
48
I present a macroeconomic model of monopolistic and monopsonistic firms facing general demand and labor supply functions. Small costs of changing prices support large output fluctuations when nominal demand changes; this holds in both partial equilibrium and macroeconomic contexts, and for both monopolistic and competitive firms. A monopolistic economy may exhibit multiplier effects, but need not allow bigger business cycles than a competitive economy. Small menu costs have large welfare consequences only in monopolistic economies, but the welfare costs of symmetric fluctuations are on average trivial in any case.
Additional Metadata | |
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Persistent URL | dx.doi.org/10.1016/0164-0704(89)90015-3 |
Journal | Journal of Macroeconomics |
Citation |
Rowe, N. (1989). Do small menu costs cause bigger and badder business cycles in monopolistic macroeconomies?. Journal of Macroeconomics, 11(1), 25–48. doi:10.1016/0164-0704(89)90015-3
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