@article{c144ff4916974388ac2e77a7d025ac36,
title = "Monetary policy, firm heterogeneity, and product variety",
abstract = "This study provides new insights on the allocative effect of monetary policy. It shows that contractionary monetary policy exerts an important reallocation effect by cleansing unproductive firms and enhancing aggregate productivity. At the same time, however, reallocation involves a reduction in the number of product variety that is central to consumer preferences and hurts welfare. A contractionary policy prevents the entry of new firms and insulates incumbent firms from competition, reducing aggregate productivity. We provide empirical evidence on U.S. data that corroborates the relevance of monetary policy for product variety resulting from firm entry and exit.",
keywords = "Firm heterogeneity, Monetary policy, Product variety, Reallocation",
author = "Masashige Hamano and Francesco Zanetti",
note = "Funding Information: We are grateful to Florin Bilbiie, Ippei Fujiwara, Ben Moll, Michiru Sakane, Philip Schnattinger, and Petr Sedlaceck for insightful discussions and to seminar participants at the First Keio-Waseda Macro Workshop in 2018, the 20th Macro Conference in 2020, the Annual Congress of the European Economic Association in 2020, Newcastle University, and the University of Oxford for helpful comments. We are grateful to the Murata Science Foundation and JSPS KAKENHI Grant Numbers JP18K01521 and JP19KK0338, British Academy Grant Number MD20/200025, and Leverhulme Trust for financial support. Funding Information: We are grateful to Florin Bilbiie, Ippei Fujiwara, Ben Moll, Michiru Sakane, Philip Schnattinger, and Petr Sedlaceck for insightful discussions and to seminar participants at the First Keio-Waseda Macro Workshop in 2018, the 20th Macro Conference in 2020, the Annual Congress of the European Economic Association in 2020, Newcastle University, and the University of Oxford for helpful comments. We are grateful to the Murata Science Foundation and JSPS KAKENHI Grant Numbers JP18K01521 and JP19KK0338 , British Academy Grant Number MD20/200025 , and Leverhulme Trust for financial support. Publisher Copyright: {\textcopyright} 2022",
year = "2022",
month = may,
doi = "10.1016/j.euroecorev.2022.104089",
language = "English",
volume = "144",
journal = "European Economic Review",
issn = "0014-2921",
publisher = "Elsevier",
}