A Macroeconomic Model of Entry with Exporters and Multinationals
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Lilia Cavallari
This paper provides a framework for the analysis of firms' integration strategies that incorporates the endogenous determination of the number of firms that serve foreign markets through exports and the number of multinational firms that choose to engage in horizontal foreign direct investments. The aim of the study is to investigate how differences in firms' integration strategies affect the way productivity and monetary policy shocks spread their effects worldwide. Building on a general equilibrium model in the tradition of the new open economy macroeconomics with national and multinational enterprises, I find that firms' integration strategies play a key role in the international business cycle and they help explain a number of puzzling features in exchange rate data. The paper makes two main contributions. First, it provides an explanation of long-term deviations from purchasing power parity due to changes in the extensive margin of firms serving world markets via exporting and foreign investment that is novel in the literature. Second, it explores optimal monetary policy in a framework with endogenous trade and foreign investments, elucidating an interesting new trade-off between efficiency and volatility. My results show that monetary stabilization, by discouraging entry of new firms, might involve a policy trade-off between the desire to smooth fluctuations in producers' prices and the need to facilitate adjustments in consumers' prices.
©2011 Walter de Gruyter GmbH & Co. KG, Berlin/Boston
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- Topics Article
- To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
- Economic Growth: A Channel Decomposition Exercise
- Liquidity Effects, Variable Time Preference, and Optimal Monetary Policy
- Optimal Monetary Policy, Endogenous Sticky Prices, and Multiple Equilibria
- A Simple Wicksellian Macroeconomic Model
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- A Positive Analysis of Targeted Employment Protection Legislation
- The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics
- Exchange Rate Regimes, Inflation and Growth in Developing Countries -- An Assessment
- Does Permanent Income Determine the Vote?
- Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited
- Savers, Spenders and Fiscal Policy in a Small Open Economy
- Assessing Sign Restrictions
- Euro Area Inflation Differentials
- Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002
- Gold, Fiat Money, and Price Stability
- Housing Tenure and Wealth Distribution in Life Cycle Economies
- Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries
- Political Sustainability of Unfunded Pensions in an Endogenous Growth Model
- Institutional Determinants of International Equity Portfolios - A Country-Level Analysis
- Contributions Article
- The Arrow Effect under Competitive R&D
- Openness, Wage Floors and Technology Change
- Explaining the Evidence on Inequality and Growth: Informality and Redistribution
- Nominal Debt Dynamics, Credit Constraints and Monetary Policy
- TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run
- A Comparison of Five Federal Reserve Chairmen: Was Greenspan the Best?
- Specialization Patterns and the Factor Bias of Technology
- Inspecting the Mechanism Exactly: A Closed-form Solution to a Stochastic Growth Model
- ICT and Productivity Resurgence: A Growth Model for the Information Age
- A Macroeconomic Model of Entry with Exporters and Multinationals
- The Response of Business Fixed Investment to Changes in Energy Prices: A Test of Some Hypotheses about the Transmission of Energy Price Shocks
- Advances Article
- Stable Sunspot Equilibria in a Cash-in-Advance Economy
- Should Monetary Policy Use Long-Term Rates?
- Habit Formation and Aggregate Consumption Dynamics
- Factor Utilization and the Real Impact of Financial Crises
Artikel in diesem Heft
- Topics Article
- To Pool or to Aggregate? Tests with a Dynamic Panel Macroeconometric Model of Australian State Labor Markets
- Economic Growth: A Channel Decomposition Exercise
- Liquidity Effects, Variable Time Preference, and Optimal Monetary Policy
- Optimal Monetary Policy, Endogenous Sticky Prices, and Multiple Equilibria
- A Simple Wicksellian Macroeconomic Model
- Confidence-Enhanced Economic Growth
- A Positive Analysis of Targeted Employment Protection Legislation
- The Political Economy of Numbers: On the Application of Benford's Law to International Macroeconomic Statistics
- Exchange Rate Regimes, Inflation and Growth in Developing Countries -- An Assessment
- Does Permanent Income Determine the Vote?
- Rich, Poor and Growth-Miracle Nations: Multiple Equilibria Revisited
- Savers, Spenders and Fiscal Policy in a Small Open Economy
- Assessing Sign Restrictions
- Euro Area Inflation Differentials
- Decomposing Consumer Wealth Effects: Evidence on the Role of Real Estate Assets Following the Wealth Cycle of 1990-2002
- Gold, Fiat Money, and Price Stability
- Housing Tenure and Wealth Distribution in Life Cycle Economies
- Fiscal Discipline and the Cost of Public Debt Service: Some Estimates for OECD Countries
- Political Sustainability of Unfunded Pensions in an Endogenous Growth Model
- Institutional Determinants of International Equity Portfolios - A Country-Level Analysis
- Contributions Article
- The Arrow Effect under Competitive R&D
- Openness, Wage Floors and Technology Change
- Explaining the Evidence on Inequality and Growth: Informality and Redistribution
- Nominal Debt Dynamics, Credit Constraints and Monetary Policy
- TFP Differences and the Aggregate Effects of Labor Mobility in the Long Run
- A Comparison of Five Federal Reserve Chairmen: Was Greenspan the Best?
- Specialization Patterns and the Factor Bias of Technology
- Inspecting the Mechanism Exactly: A Closed-form Solution to a Stochastic Growth Model
- ICT and Productivity Resurgence: A Growth Model for the Information Age
- A Macroeconomic Model of Entry with Exporters and Multinationals
- The Response of Business Fixed Investment to Changes in Energy Prices: A Test of Some Hypotheses about the Transmission of Energy Price Shocks
- Advances Article
- Stable Sunspot Equilibria in a Cash-in-Advance Economy
- Should Monetary Policy Use Long-Term Rates?
- Habit Formation and Aggregate Consumption Dynamics
- Factor Utilization and the Real Impact of Financial Crises
