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Full-Text Articles in International 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