Customer Flows, Countercyclical Markups, and the Persistent Effects of Monetary Shocks

Posted: 30 Apr 1998

See all articles by Peter N. Ireland

Peter N. Ireland

Boston College - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: September 1995

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.

JEL Classification: D11

Suggested Citation

Ireland, Peter N., Customer Flows, Countercyclical Markups, and the Persistent Effects of Monetary Shocks (September 1995). Available at SSRN: https://ssrn.com/abstract=4124

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