Author Description

Using a macroeconomic model, Nishimura links a microeconomic model of imperfectly informed firms in monopolistic competition to a general theory of wage and price setting. His analysis is based on profit maximization and rational behavior, in line with the New Keynesian approach in its emphasis on the microeconomic foundations of macroeconomics. It shows that increased competition may increase nominal as well as real price rigidity and increased volatility of investment.