Dixon, Huw David ORCID: https://orcid.org/0000-0002-9875-8965 and Hansen, Claus Thustrup 1999. A mixed industrial structure magnifies the importance of menu costs. European Economic Review 43 (8) , pp. 1475-1499. 10.1016/S0014-2921(98)00029-4 |
Abstract
New Keynesian literature assumes symmetric industrial structure when analysing explanations of money non-neutrality. This paper analyses the impact of modifying this assumption by allowing for a mixed industrial structure; some industries are characterized by monopolistic competition, others by perfect competition. The mixed industrial structure implies misallocation of labour between the different industries which may contribute to explanations of non-neutrality of money. Following a 5% money increase, the menu costs needed for non-neutrality may be 40 times smaller and ratio of welfare gain over private loss more than 100 times larger than in the corresponding model with a symmetric structure.
Item Type: | Article |
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Date Type: | Publication |
Status: | Published |
Schools: | Business (Including Economics) |
Subjects: | H Social Sciences > HB Economic Theory |
Uncontrolled Keywords: | New Keynesian economics; Industrial structure |
Publisher: | Elsevier |
ISSN: | 0014-2921 |
Last Modified: | 24 Oct 2022 12:00 |
URI: | https://orca.cardiff.ac.uk/id/eprint/50057 |
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