MONETARY NEUTRALITY WITH STICKY PRICES AND FREE ENTRY

• 成果类型: Article
• 署名作者: Bilbiie, Florin O.
• 署名单位: University of Lausanne; Centre for Economic Policy Research - UK
• 刊物名称: REVIEW OF ECONOMICS AND STATISTICS
• ISSN/ISSBN: 0034-6535
• DOI: 10.1162/rest_a_00898
• 发表日期: 2021-07
• 页码: 492-504
• 关键词: increasing returns; monopolistic competition; markup variations; product variety; firm dynamics; BUSINESS; POLICY; money

摘要

Monetary policy is neutral even with fixed prices if free entry determines product variety optimally, as in Dixit and Stiglitz (1977). Entry substitutes for price flexibility in the welfare-based price index when individual prices are sticky. In response to aggregate demand expansions, the intensive (quantity produced of each good) and ex tensive (number of goods being produced) margins move in offsetting ways, leaving aggregate production unchanged. Price stickiness thus generates deviations from monetary neutrality only in conjunction with entry frictions: when variety is not optimally determined (preferences are not Dixit-Stiglitz) or when entry is subject to sunk costs and lags. Wage stickiness instead implies nonneutrality even in the frictionless-entry benchmark.