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The Cyclicality of Markups in a Model with Adjustment Costs: Econometric Evidence for US Industry

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Author Info
Galeotti, Marzio
Schiantarelli, Fabio

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Abstract

In this paper, the authors investigate the impact of demand fluctuations on market power in U.S. manufacturing industries. They impose on a model with adjustment costs the minimum structure necessary to recover a measure of markups. Markups are allowed to vary with both the state and future evolution of demand and estimates of price-cost margins are obtained from the Euler equation for capital. The authors conduct the empirical investigation for U.S. two-digit manufacturing industries using annual data covering the 1952-85 period. They find that markups are inversely related to current demand. However, given the state of demand, they vary directly with expectations of future demand changes. Copyright 1998 by Blackwell Publishing Ltd

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Publisher Info
Article provided by Department of Economics, University of Oxford in its journal Oxford Bulletin of Economics & Statistics.

Volume (Year): 60 (1998)
Issue (Month): 2 (May)
Pages: 121-42
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Handle: RePEc:bla:obuest:v:60:y:1998:i:2:p:121-42

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  1. Ines Perez-Soba Aguilar & Elena Marquez de la Cruz & Ana Rosa Martinez-Canete & Alfonso Palacio-Vera, 2006. "Capital Stock and Unemployment Searching for the Missing Link," Economics Working Paper Archive wp_475, Levy Economics Institute, The. [Downloadable!]
  2. Warren, Paul, 2005. "Rentabilité des entreprises sous contrôle canadien par rapport aux entreprises sous contrôle américain," Série de documents de recherche sur l'analyse économique (AE) 2005030f, Statistics Canada, Direction des études analytiques. [Downloadable!]
  3. Alain Gabler, 2007. "Sector-specific Markup Fluctuations and the Business Cycle," Economics Working Papers ECO2007/25, European University Institute. [Downloadable!]
  4. Federico S. Mandelman, 2006. "Business cycles and monetary regimes in emerging economies: a role for a monopolistic banking sector," Working Paper 2006-17, Federal Reserve Bank of Atlanta. [Downloadable!]
  5. Domenico Marchetti, 2002. "Markups and the Business Cycle: Evidence from Italian Manufacturing Branches," Open Economies Review, Springer, vol. 13(1), pages 87-103, January. [Downloadable!] (restricted)
  6. Domenica J. Marchetti, 1999. "Markup and the Business Cycle: Evidence from Italian Manufacturing Branches," Temi di discussione (Economic working papers) 362, Bank of Italy, Economic Research Department. [Downloadable!]
  7. Johann Burgstaller, 2006. "The cyclicality of interest rate spreads in Austria: Evidence for a financial decelerator?," Economics working papers 2006-02, Department of Economics, Johannes Kepler University Linz, Austria. [Downloadable!]
  8. Ángel Estrada & David López-Salido, 2005. "Sectoral mark-up dynamics in Spain," Banco de España Working Papers 0503, Banco de España. [Downloadable!]
  9. Federico S. Mandelman, 2006. "Business cycles: a role for imperfect competition in the banking system," Working Paper 2006-21, Federal Reserve Bank of Atlanta. [Downloadable!]
  10. Warren, Paul, 2005. "Profitability of Canadian- Versus U.S.-controlled Enterprises," Economic Analysis (EA) Research Paper Series 2005030e, Statistics Canada, Analytical Studies Branch. [Downloadable!]
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