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Product scope and endogenous fluctuations

Pavlov, O ORCID: 0000-0002-3961-1242 and Weder, M 2017 , 'Product scope and endogenous fluctuations' , Review of Economic Dynamics, vol. 24 , pp. 175-191 , doi: 10.1016/j.red.2017.01.006.

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Abstract

Recent empirical evidence suggests that product creation is procyclical and it occurs largely within existing firms. Motivated by these findings, the current paper investigates the role of intra-firm product scope choice in a general equilibrium economy with oligopolistic producers. It shows that the multi-product nature of firms makes the economy susceptible to sunspot equilibria. The model is estimated via Bayesian methods. Artificial business cycles closely resemble empirically observed fluctuations with sunspots explaining a significant portion of U.S. business cycles.

Item Type: Article
Authors/Creators:Pavlov, O and Weder, M
Keywords: indeterminacy, sunspot equilibria, multi-product firms, business cycles, bayesian estimation
Journal or Publication Title: Review of Economic Dynamics
Publisher: Academic Press Inc Elsevier Science
ISSN: 1094-2025
DOI / ID Number: 10.1016/j.red.2017.01.006
Copyright Information:

© 2017 Elsevier Inc

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