Corpus ID: 226278363

Monetary Policy and Firm Dynamics

  title={Monetary Policy and Firm Dynamics},
  author={Matthew Read},
  journal={arXiv: General Economics},
Do firm dynamics matter for the transmission of monetary policy? Empirically, the startup rate declines following a monetary contraction, while the exit rate increases, both of which reduce aggregate employment. I present a model that combines firm dynamics in the spirit of Hopenhayn (1992) with New-Keynesian frictions and calibrate it to match cross-sectional evidence. The model can qualitatively account for the responses of entry and exit rates to a monetary policy shock. However, the… Expand