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

TitleMonopolistic competition, increasing returns to scale, and the welfare costs of inflation
Authors
KeywordsDynamic Indeterminacy
E31
E32
E37
Monopolistic Competition
Welfare Costs Of Inflation
Issue Date2000
PublisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jme
Citation
Journal Of Monetary Economics, 2000, v. 46 n. 2, p. 417-440 How to Cite?
AbstractThis paper 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. © 2000 Elsevier Science B.V.
Persistent Identifierhttp://hdl.handle.net/10722/177712
ISSN
2015 Impact Factor: 2.488
2015 SCImago Journal Rankings: 4.150
References

 

DC FieldValueLanguage
dc.contributor.authorWu, Yen_US
dc.contributor.authorZhang, Jen_US
dc.date.accessioned2012-12-19T09:39:39Z-
dc.date.available2012-12-19T09:39:39Z-
dc.date.issued2000en_US
dc.identifier.citationJournal Of Monetary Economics, 2000, v. 46 n. 2, p. 417-440en_US
dc.identifier.issn0304-3932en_US
dc.identifier.urihttp://hdl.handle.net/10722/177712-
dc.description.abstractThis paper 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. © 2000 Elsevier Science B.V.en_US
dc.languageengen_US
dc.publisherElsevier BV. The Journal's web site is located at http://www.elsevier.com/locate/jmeen_US
dc.relation.ispartofJournal of Monetary Economicsen_US
dc.subjectDynamic Indeterminacyen_US
dc.subjectE31en_US
dc.subjectE32en_US
dc.subjectE37en_US
dc.subjectMonopolistic Competitionen_US
dc.subjectWelfare Costs Of Inflationen_US
dc.titleMonopolistic competition, increasing returns to scale, and the welfare costs of inflationen_US
dc.typeArticleen_US
dc.identifier.emailZhang, J: jjzhang@econ.hku.hken_US
dc.identifier.authorityZhang, J=rp01124en_US
dc.description.naturelink_to_subscribed_fulltexten_US
dc.identifier.scopuseid_2-s2.0-0042415699en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0042415699&selection=ref&src=s&origin=recordpageen_US
dc.identifier.volume46en_US
dc.identifier.issue2en_US
dc.identifier.spage417en_US
dc.identifier.epage440en_US
dc.publisher.placeNetherlandsen_US
dc.identifier.scopusauthoridWu, Y=7406895405en_US
dc.identifier.scopusauthoridZhang, J=55367373100en_US

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