Optimal monetary policy and firm entry
Ghent University and IMFS, Goethe University Frankfurt
New Keynesian model with endogenous firm entry, cash-in-advance constraint, preset wages, monopolistic competition in goods and labor markets, and labor requirement for firm startups
intermediate firms: monopolistic competition with Dixit-Stiglitz aggregation; final goods firm: perfect competition
Table 1, Productivity shock
Two-state numerical example with sticky wages; productivity shock Z takes values 1.5 and 0.5; optimal policy achieves higher welfare than flexible wages