The creation of new firms, referred to as the extensive margin, is a significant but overlooked dimension of monetary policy. A monetary VAR documents that monetary policy has significant effects on firm creation. An analytically tractable model combining sticky prices and firm entry shows that entry alters the transmission of monetary policy innovations, acting much like a type of investment in more standard models. Monetary policy rules that offset the uncertainty of productivity shocks can raise the mean level of entry and thereby welfare, suggesting a new motivation for stabilization policy.

Corsetti, G., Bergin, P. (2008). The extensive margin and monetary policy. JOURNAL OF MONETARY ECONOMICS, 55(7), 1222-1237 [10.1016/j.jmoneco.2008.08.011].

The extensive margin and monetary policy

CORSETTI, Giancarlo;
2008-01-01

Abstract

The creation of new firms, referred to as the extensive margin, is a significant but overlooked dimension of monetary policy. A monetary VAR documents that monetary policy has significant effects on firm creation. An analytically tractable model combining sticky prices and firm entry shows that entry alters the transmission of monetary policy innovations, acting much like a type of investment in more standard models. Monetary policy rules that offset the uncertainty of productivity shocks can raise the mean level of entry and thereby welfare, suggesting a new motivation for stabilization policy.
2008
Corsetti, G., Bergin, P. (2008). The extensive margin and monetary policy. JOURNAL OF MONETARY ECONOMICS, 55(7), 1222-1237 [10.1016/j.jmoneco.2008.08.011].
File in questo prodotto:
Non ci sono file associati a questo prodotto.

I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.

Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11590/131268
Citazioni
  • ???jsp.display-item.citation.pmc??? ND
  • Scopus 73
  • ???jsp.display-item.citation.isi??? 68
social impact