Monopolistic Competition and Aggregate Demand
New Keynesian (ニュー・ケインジアン)
Monopolistic competition (独占的競争)
Monopolistic Competition equilibrium (独占的競争均衡)
Aggregate demand externality (総需要の外部性)
Menu cost (メニュー・コスト)
The results of this paper are tantalizingly close to those of traditional Keynesian models. Under monopolistic competition output is too low，because of an aggregate demand externality. This externality，together with small menu costs，implies that movements in demand can affect output. The scope for small menu costs to lead to large output effects in our models depends critically on the elasticity of labor with respects to the real wage being large enough. In particular，increases in nominal money can increase both output and welfare. Section2 builds a simple general equilibrium model，with goods，labor，and money，and monopolistic competition in both the goods and the labor markets. It then characterizes the equilibrium. Section3 characterizes the inefficiency associated with monopolistic competition and shows that it is associated with an aggregate demands externality. Section4 studies the effects of "menu costs" when combined with monopolistic competition. It shows the close relation between this result and aggregate demands externality identified in Section3. We believe these results to be important to the understanding of macroeconomic fluctuations.