Erschienen in:FRB of St. Louis Working Paper ; No. 2009-032B
Umfang:
1 Online-Ressource (46 p)
Sprache:
Englisch
DOI:
10.2139/ssrn.1444899
Identifikator:
Entstehung:
Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments October 23, 2009 erstellt
Beschreibung:
Monetary policy has significant but overlooked effects on entry and exit of firms. We study optimal monetary stabilization policy in a DSGE model with microfounded money demand and endogenous firm entry. Due to a congestion externality affecting firm entry, the optimal policy deviates from the Friedman rule in all states even though all prices are fully flexible. In contrast to previous Ramsey model with flexible price, our calibration exercises suggest that the model can generate a high volatility of the nominal interest rate which is a direct consequence of policy actions to control entry