NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Monopolistic Competition, Aggregate Demand Externalities and Real Effects of Nominal Money

Olivier J. Blanchard, Nobuhiro Kiyotaki

NBER Working Paper No. 1770 (Also Reprint No. r1113)
Issued in December 1985
NBER Program(s):   EFG

A long standing issue in macroeconomics is that of the relation of imperfect competition to fluctuations in output. In this paper we examine the relation between monopolistic competition and the role of aggregate demand in the determination of output. We first show that monopolistically competitive economies exhibit an aggregate demand externality. We then show that, because of this externality, small menu costs, that is small costs of changing prices may lead to large effects of aggregate demand on output and on welfare.

download in pdf format
   (318 K)

email paper

This paper is available as PDF (318 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w1770

Published: Blanchard, Olivier and Nobuhiro Kiyotaki. "Monopolistic Competition and the Effects of Aggregate Demand," American Economic Review, Vol. 77, No. 4, September 1987, pp. 647-666.

Users who downloaded this paper also downloaded these:
Aizenman Monopolistic Competition and Labor Market Adjustment in the Open Economy
Goodfriend and King The New Neoclassical Synthesis and the Role of Monetary Policy
Mankiw w2386 Imperfect Competition and the Keynesian Cross
Blanchard w14259 The State of Macro
Ball and Romer w2171 Are Prices Too Sticky?
 
Publications
Activities
Meetings
NBER Videos
Data
People
About

Support
National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email: info@nber.org

Contact Us