Spanish working paper explores inflation dynamics
Economists build and compare different DSGE models
Industrial structures in which large, more productive firms predominate "tend to deliver more muted inflation responses" to exogenous shocks, according to a working paper published by the Bank of Spain today.
In Inflation Dynamics in A Model with Firm Entry and (Some) Heterogeneity, Javier Andrés and Pablo Burriel analyse how the coexistence of firms with different productivity levels impacts the inflation dynamics of an economy.
"We build up an otherwise standard DSGE model in which the number
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