Firms' entry, monetary policy and the international business cycle

JEL codes: 
E32, E52
Version Date: 
Jul 2013

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 datawhile at the sametimeproviding positive international comovements. Simulations show that the presence of imported investment goods is essential for replicating these facts.

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