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Monopolistic Competition, Relative Prices and Output Adjustment in the Open Economy / Joshua Aizenman.
- Format:
- Book
- Author/Creator:
- Aizenman, Joshua.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w1787.
- NBER working paper series no. w1787
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 1986.
- Summary:
- The purpose of this paper is to explain price and output dynamics in an open economy characterized by a monopolistic competitive market structure in which pricing decisions incur costs. That lead producers to pre-set the price path for several periods. The paper derives an optimal pricing rule, including the optimal pre-setting horizon. It does so for a rational expectation equilibrium, characterized by staggered, unsynchronized price setting, for which the degree of staggering is endogenously determined. The discussion focuses on the critical role of the degree of domestic-foreign goods substitutability in explaining price and output effects of monetary and real shocks.
- Notes:
- Print version record
- 1986.
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