  Do firm dynamics matter for the transmission of monetary policy? Empirically,
the startup rate declines following a monetary contraction, while the exit rate
increases, both of which reduce aggregate employment. I present a model that
combines firm dynamics in the spirit of Hopenhayn (1992) with New-Keynesian
frictions and calibrate it to match cross-sectional evidence. The model can
qualitatively account for the responses of entry and exit rates to a monetary
policy shock. However, the responses of macroeconomic variables closely
resemble those in a representative-firm model. I discuss the equilibrium forces
underlying this approximate equivalence, and what may overturn this result.
