IDEAS home Printed from https://ideas.repec.org/p/fip/fedrwp/95-04.html
   My bibliography  Save this paper

Customer flows, countercyclical markups, and the persistent effects of monetary shocks

Author

Listed:
  • Peter N. Ireland

Abstract

This paper develops a general equilibrium model in which households face fixed costs associated with searching for a new supplier of consumption goods. These search costs provide firms with some monopoly power over their existing customers and generate the kind of customer flow dynamics first considered by Phelps and Winter. Customer flows, in turn, cause markups of price over marginal cost to vary countercyclically, both amplify and propagate the effects of technology shocks on output, and allow the effects of monetary shocks on output to persist.

Suggested Citation

  • Peter N. Ireland, 1995. "Customer flows, countercyclical markups, and the persistent effects of monetary shocks," Working Paper 95-04, Federal Reserve Bank of Richmond.
    • Handle: RePEc:fip:fedrwp:95-04
    as

    Download full text from publisher

    File URL: http://www.richmondfed.org/publications/research/working_papers/1995/wp_95-4.cfm
    Download Restriction: no
    File URL: https://www.richmondfed.org/-/media/RichmondFedOrg/publications/research/working_papers/1995/pdf/wp95-4.pdf
    File Function: Full text
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Judd, Kenneth L., 1985. "The law of large numbers with a continuum of IID random variables," Journal of Economic Theory, Elsevier, vol. 35(1), pages 19-25, February.
    2. Laurence Ball & David Romer, 1990. "Real Rigidities and the Non-Neutrality of Money," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 57(2), pages 183-203.
    3. Wright, Randall, 1986. "Job Search and Cyclical Unemployment," Journal of Political Economy, University of Chicago Press, vol. 94(1), pages 38-55, February.
    4. Peter Howitt, 1988. "Business Cycles With Costly Search and Recruiting," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 103(1), pages 147-165.
    5. Gordon, Robert J, 1981. "Output Fluctuations and Gradual Price Adjustment," Journal of Economic Literature, American Economic Association, vol. 19(2), pages 493-530, June.
    6. Julio J. Rotemberg & Michael Woodford, 1991. "Markups and the Business Cycle," NBER Chapters, in: NBER Macroeconomics Annual 1991, Volume 6, pages 63-140, National Bureau of Economic Research, Inc.
    7. Olivier J. Blanchard, 1982. "Price Asynchronization and Price Level Inertia," NBER Working Papers 0900, National Bureau of Economic Research, Inc.
    8. Blinder, Alan S. & Fischer, Stanley, 1981. "Inventories, rational expectations, and the business cycle," Journal of Monetary Economics, Elsevier, vol. 8(3), pages 277-304.
    9. Cogley, Timothy & Nason, James M, 1995. "Output Dynamics in Real-Business-Cycle Models," American Economic Review, American Economic Association, vol. 85(3), pages 492-511, June.
    10. repec:bla:scandj:v:88:y:1986:i:2:p:417-36 is not listed on IDEAS
    11. Tobin, James, 1977. "How Dead Is Keynes?," Economic Inquiry, Western Economic Association International, vol. 15(4), pages 459-468, October.
    12. Robert E. Hall, 1975. "The Rigidity of Wages and the Persistence of Unemployment," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 6(2), pages 301-350.
    13. repec:nbr:nberre:0126 is not listed on IDEAS
    14. Feldman, Mark & Gilles, Christian, 1985. "An expository note on individual risk without aggregate uncertainty," Journal of Economic Theory, Elsevier, vol. 35(1), pages 26-32, February.
    15. Taylor, John B, 1980. "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, University of Chicago Press, vol. 88(1), pages 1-23, February.
    16. Lucas, Robert Jr., 1972. "Expectations and the neutrality of money," Journal of Economic Theory, Elsevier, vol. 4(2), pages 103-124, April.
    17. Bils, Mark, 1987. "The Cyclical Behavior of Marginal Cost and Price," American Economic Review, American Economic Association, vol. 77(5), pages 838-855, December.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kevin X. D. Huang & Zheng Liu, 1999. "Chain of Production as a Monetary Propagation Mechanism," Cahiers de recherche CREFE / CREFE Working Papers 106, CREFE, Université du Québec à Montréal.
    2. Slanicay Martin, 2014. "Some Notes on Historical, Theoretical, and Empirical Background of DSGE Models," Review of Economic Perspectives, Sciendo, vol. 14(2), pages 145-164, June.
    3. Kevin X. D. Huang, 2004. "Specific factors meet intermediate inputs : implications for strategic complementarities and persistence," Research Working Paper RWP 04-06, Federal Reserve Bank of Kansas City.
    4. Rongrong Sun, 2014. "Nominal rigidity and some new evidence on the New Keynesian theory of the output-inflation tradeoff," International Economics and Economic Policy, Springer, vol. 11(4), pages 575-597, December.
    5. Luca Colombo & Gerd Weinrich, 2006. "The Role of Expectations in a Macroeconomic Model with Inventories," Computing in Economics and Finance 2006 65, Society for Computational Economics.
    6. Oghenovo Adewale Obrimah, 2016. "Implications of New Keynesian Theory for Benchmarking of Monetary Efficiency," International Journal of Regional Development, Macrothink Institute, vol. 3(2), pages 1-76, December.
    7. Kevin Huang, 2006. "Specific factors meet intermediate inputs: implications for the persistence problem," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 9(3), pages 483-507, July.
    8. Taylor, John B., 1999. "Staggered price and wage setting in macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 15, pages 1009-1050, Elsevier.
    9. Gerd Weinrich & Luca Colombo, 2005. "Money, Inventories and Underemployment in Deflationary Recessions," Computing in Economics and Finance 2005 156, Society for Computational Economics.
    10. Froyen, Richard T & Waud, Roger N, 1988. "Real Business Cycles and the Lucas Paradigm," Economic Inquiry, Western Economic Association International, vol. 26(2), pages 183-201, April.
    11. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
    12. Olivier Blanchard, 2000. "What Do We Know about Macroeconomics that Fisher and Wicksell Did Not?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 115(4), pages 1375-1409.
    13. Susanto Basu & John Fernald, 2001. "Why Is Productivity Procyclical? Why Do We Care?," NBER Chapters, in: New Developments in Productivity Analysis, pages 225-302, National Bureau of Economic Research, Inc.
    14. Blinder, Alan S & Maccini, Louis J, 1991. "The Resurgence of Inventory Research: What Have We Learned?," Journal of Economic Surveys, Wiley Blackwell, vol. 5(4), pages 291-328.
    15. Fabiani, S. & Druant, M. & Hernando, I. & Kwapil, C. & Landau, B. & Loupias, C. & Martins, F. & Mathä, T. & Sabbatini, R. & Stahl, H. & Stockman, A., 2005. "The Pricing Behaviour of Firms in the Euro Area: New Survey Evidence," Working papers 135, Banque de France.
    16. Jaimovich, Nir, 2007. "Firm dynamics and markup variations: Implications for sunspot equilibria and endogenous economic fluctuations," Journal of Economic Theory, Elsevier, vol. 137(1), pages 300-325, November.
    17. Ieva Rubene & Paolo Guarda, 2004. "The new Keynesian Phillips curve: empirical results for Luxembourg," BCL working papers 11, Central Bank of Luxembourg.
    18. Christian Hellwig & Venky Venkateswaran, 2024. "Dispersed Information, Nominal Rigidities and Monetary Business Cycles: A Hayekian Perspective," NBER Working Papers 33215, National Bureau of Economic Research, Inc.
    19. Bennett T. McCallum, 2002. "Recent developments in monetary policy analysis: the roles of theory and evidence," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 67-96.
    20. Karanassou, Marika & Snower, Dennis J., 2007. "On the Interplay between Keynesian and Supply Side Economics," Economics Series 206, Institute for Advanced Studies.

    More about this item

    Keywords

    Business cycles; Prices;

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedrwp:95-04. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christian Pascasio (email available below). General contact details of provider: https://edirc.repec.org/data/frbrius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.