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- Title
REALLOCATION EFFECTS OF MONETARY POLICY.
- Authors
Miyakawa, Daisuke; Oikawa, Koki; Ueda, Kozo
- Abstract
We construct a model that introduces nominal rigidity into R&D‐driven endogenous growth with heterogeneous firms. The model shows that high nominal growth leads to an increase in the market share of innovative firms as menu‐cost burdens are relatively heavier for less innovative firms. This reallocation effect yields a positive effect of monetary expansion on both real growth and welfare. The optimal nominal growth can be strictly positive even under nominal rigidity. Moreover, menu costs can improve welfare. Japanese firm‐level data are consistent with the model implication in that under higher inflation, large firms grow faster than small firms.
- Subjects
MONETARY policy; MARKET share
- Publication
International Economic Review, 2022, Vol 63, Issue 2, p947
- ISSN
0020-6598
- Publication type
Article
- DOI
10.1111/iere.12558