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Full-Text Articles in Economics
Firms' Entry, Monetary Policy And The International Business Cycle, Lilia Cavallari
Firms' Entry, Monetary Policy And The International Business Cycle, Lilia Cavallari
Lilia Cavallari
This paper proposes a two-country monetary model with firm entry as a means for alleviating the comovement puzzles in international business cycle models. It shows that business formation can generate fluctuations in output, employment, investment and trade flows close to those in the data while at the same time providing positive international comovements. Simulations show that the presence of imported investment goods is essential for replicating these facts. Keywords: firm entry, international business cycle, international comovements, comovement puzzles, Taylor rule, firm markups. JEL codes: E31; E32; E52
Exports And Foreign Direct Investments In An Endogenous-Entry Model, Lilia Cavallari
Exports And Foreign Direct Investments In An Endogenous-Entry Model, Lilia Cavallari
Lilia Cavallari
Drawing on a tractable DSGE model with nominal rigidity, this paper studies the implications of firms’ entry in domestic and foreign markets for the international business cycle. The paper shows that the decision to enter a new market as well as the choice whether to invest at home or abroad depend on global monetary and productivity conditions. I find that a domestic monetary expansion might favor or deter start-up investments, depending on whether the potential entrant is a national or a multinational firm. Moreover, a structural policy change, as an increase in the degree of monetary stabilization, has a positive …