We generalize the demand side of a Real Business Cycle model introducing non-homothetic preferences over differentiated final goods. Under monopolistic competition this generates variable markups that depend on the level of consumption. We estimate a flexible preference specification through...

This paper studies the business cycle implications of entry costs in a dynamic stochastic general equilibrium model with firm entry and nominal rigidity. Simulations show that my baseline model matches the dynamics observed in the data fairly well. Remarkably, it overcomes the difficulties...