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

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  • Galeotti, Marzio
  • Schiantarelli, Fabio

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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Bibliographic 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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Cited by:
  1. Mandelman, Federico S., 2010. "Business cycles and monetary regimes in emerging economies: A role for a monopolistic banking sector," Journal of International Economics, Elsevier, vol. 81(1), pages 122-138, May.
  2. Warren, Paul, 2005. "Rentabilite des entreprises sous controle canadien par rapport aux entreprises sous controle americain," Serie de documents de recherche sur l'analyse economique (AE) 2005030f, Statistics Canada, Direction des etudes analytiques.
  3. Yossi Spiegel & Konrad O. Stahl, 2014. "Industry Structure and Pricing over the Business Cycle," CESifo Working Paper Series 4848, CESifo Group Munich.
  4. Warren, Paul, 2005. "Profitability of Canadian- Versus U.S.-controlled Enterprises," Economic Analysis (EA) Research Paper Series 2005030e, Statistics Canada, Analytical Studies Branch.
  5. Ángel Estrada & David López-Salido, 2005. "Sectoral mark-up dynamics in Spain," Banco de Espa�a Working Papers 0503, Banco de Espa�a.
  6. 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.
  7. Alain Gabler, 2008. "Sector-specific Markup Fluctuations and the Business Cycle," 2008 Meeting Papers 88, Society for Economic Dynamics.
  8. Andrea Vaona, 2010. "A nonparametric panel data approach to the cyclical dynamics of price-cost margins," Kiel Working Papers 1580, Kiel Institute for the World Economy.
  9. Domenico Marchetti, 2002. "Markups and the Business Cycle: Evidence from Italian Manufacturing Branches," Open Economies Review, Springer, vol. 13(1), pages 87-103, January.
  10. Federico S. Mandelman, 2006. "Business cycles: a role for imperfect competition in the banking system," Working Paper 2006-21, Federal Reserve Bank of Atlanta.
  11. 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.

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