Monopolistic competition, increasing returns to scale, and the welfare costs of inflation

• 成果类型: Article
• 署名作者: Wu, YR; Zhang, JX
• 署名单位: Rutgers University System; Rutgers University Newark; Rutgers University New Brunswick; University of Hong Kong
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/S0304-3932(00)00036-2
• 发表日期: 2000
• 页码: 417-440
• 关键词: welfare costs of inflation; monopolistic competition; dynamic indeterminacy

摘要

This payer introduces monopolistic competition and increasing returns to scale into a monetary real business cycle (RBC) model to re-estimate the welfare costs of inflation. We first calibrate the model and show that it is capable of generating the observed aggregate fluctuations even when there are no shocks to the fundamentals. In particular, we demonstrate that this model matches the stylized U.S. business cycles facts as well as two more standard models. Then, we find that in this model the scale parameters and the intensity of competition significantly affects the welfare cost of inflation. Specifically, the cost is considerably higher than that in a standard RBC model with competitive markets and constant returns. Moreover, the stronger the increasing returns and the less intense the competition, the higher the welfare costs. These results are confirmed in a number of model specifications. (C) 2000 Elsevier Science B.V. All rights reserved. JEL classification E31; E32, E37.