Imperfect competition and indeterminacy of aggregate output

• 成果类型: Article
• 署名作者: Wang, Pengfei; Wen, Yi
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - St. Louis; Hong Kong University of Science & Technology
• 刊物名称: JOURNAL OF ECONOMIC THEORY
• ISSN/ISSBN: 0022-0531
• DOI: 10.1016/j.jet.2007.01.021
• 发表日期: 2008
• 页码: 519-540
• 关键词: Indeterminacy; Global sunspots; self-fulfilling expectations; Procyclical productivity; marginal costs; Counter-cyclical markup; Cost-push shocks; Hump-shaped impulse responses

摘要

This paper shows imperfect competition can lead to indeterminacy in aggregate output in a standard DSGE model with imperfect competition. Indeterminacy arises in the model from the composition of aggregate output. In sharp contrast to the indeterminacy literature pioneered by Benhabib and Farmer [J. Benhabib, R. Farmer, Indeterminacy and increasing returns, J. Econ. Theory 63 (1) (1994) 19-41] and Gali [J. Gali, Monopolistic competition, business cycles, and the composition of aggregate demand, J. Econ. Theory 63 (1) (1994) 73-96], indeterminacy in our model is global; hence it is more robust to structural parameters. In addition, sunspots in our model can be autocorrelated. The paper provides a justification for exogenous variations in desired markups, which play an important role as a source of cost-push shocks in the monetary policy literature. Our model outperforms a standard RBC model driven by technology shocks in several dimensions, including the volatility of labor market and the hump-shaped output dynamics. (C) 2008 Published by Elsevier Inc.