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This module will assess the signi… cance of imperfect competition in modern macroeconomics. The broad context is the modern business cycle research program, in which we look at shocks and propagation mechanisms in versions of the dynamic stochastic growth model. The variant of this model with imperfect competition is fast becoming another” benchmark” macroeconomic model. In this module I will try to do three things. First, I will argue that imperfect competition is an interesting and worthwhile addition to business cycle research. Second, I will go through the workings of the basic model in some detail, in order to provide some guidance for those who are interested in conducting original research based on the model. Third, I will review some quantitative evidence on the e¤ ects of imperfect competition in dynamic business cycle models. The module will also serve as background for my seminar paper on” Does State-Dependent Pricing Imply Coordination Failure?”.

I am aware that the (provisional) list of topics given below is ambitious. Obviously, I plan to touch only very brie‡ y on some of the issues listed. I will focus on imperfect competition in goods markets only, although there is a substantial literature that considers monopoly power of unions. I will also not look at the role of imperfect competition in endogenous growth models.