Imperfect Competition and the Effects of Energy Price Increases on Economic Activity

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Imperfect Competition and the Effects of Energy Price Increases on Economic Activity

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Rotemberg, Julio J
Woodford, Michael

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Abstract

The authors show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil. Plausibly parameterized models of this type are able to mimic the response of output and real wages in the United States. The responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output. Copyright 1996 by Ohio State University Press.

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Publisher Info
Article provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.

Volume (Year): 28 (1996)
Issue (Month): 4 (November)
Pages: 550-77
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Handle: RePEc:mcb:jmoncb:v:28:y:1996:i:4:p:550-77

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Paper
- Julio J. Rotemberg & Michael Woodford, 1996. "Imperfect Competition and the Effects of Energy Price Increases on Economic Activity," NBER Working Papers 5634, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

Basu, Susanto, 1995. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," American Economic Review, American Economic Association, vol. 85(3), pages 512-31, June. [Downloadable!] (restricted)
Other versions:
- Basu, S., 1993. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," Papers 93-23, Michigan - Center for Research on Economic & Social Theory.
- Susanto Basu, 1994. "Intermediate Goods and Business Cycles: Implications for Productivity and Welfare," NBER Working Papers 4817, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Burbidge, John & Harrison, Alan, 1984. "Testing for the Effects of Oil-Price Rises Using Vector Autoregressions," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 25(2), pages 459-84, June. [Downloadable!] (restricted)
Darby, Michael R, 1982. "The Price of Oil and World Inflation and Recession," American Economic Review, American Economic Association, vol. 72(4), pages 738-51, September. [Downloadable!] (restricted)
Other versions:
- Michael R. Darby, 1981. "The Price of Oil and World Inflation and Recession," UCLA Economics Working Papers 228, UCLA Department of Economics. [Downloadable!]
Pindyck, Robert S & Rotemberg, Julio J, 1983. "Dynamic Factor Demands and the Effects of Energy Price Shocks," American Economic Review, American Economic Association, vol. 73(5), pages 1066-79, December. [Downloadable!] (restricted)
Rotemberg, Julio J, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Blackwell Publishing, vol. 49(4), pages 517-31, October. [Downloadable!] (restricted)
Eswar Prasad & Michael P. Keane, 1995. "The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis," IMF Working Papers 95/37, International Monetary Fund.
Other versions:
- Keane, Michael P & Prasad, Eswar S, 1996. "The Employment and Wage Effects of Oil Price Changes: A Sectoral Analysis," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 389-400, August. [Downloadable!] (restricted)
Carruth,a. & Hooker, N. & Oswald,A., 1997. "Unemployment Equilibria and Input Prices: Theory and Evidence from the United States," Papers 22, Centre for Economic Performance & Institute of Economics.
Other versions:
- Carruth, A.A. & Hooker, M.A. & Oswald, A.J., 1998. "Unemployment Equilibria and Input Prices: Theory and Evidence from the United States," The Warwick Economics Research Paper Series (TWERPS) 496, University of Warwick, Department of Economics. [Downloadable!]
- Alan A. Carruth & Mark A. Hooker & Andrew J. Oswald, 1998. "Unemployment Equilibria And Input Prices: Theory And Evidence From The United States," The Review of Economics and Statistics, MIT Press, vol. 80(4), pages 621-628, November. [Downloadable!] (restricted)
Ball, L. & Mankiw, G.H., 1992. "Relative-Price Change as Aggregate Supply Shocks," Harvard Institute of Economic Research Working Papers 1609, Harvard - Institute of Economic Research.
Other versions:
- Laurence Ball & N. Gregory Mankiw, 1995. "Relative-Price Changes as Aggregate Supply Shocks," NBER Working Papers 4168, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- Laurence Ball & N. Gregory Mankiw, 1993. "Relative-price changes as aggregate supply shocks," Working Papers 93-13, Federal Reserve Bank of Philadelphia.
- Ball, Laurence & Mankiw, N Gregory, 1995. "Relative-Price Changes as Aggregate Supply Shocks," The Quarterly Journal of Economics, MIT Press, vol. 110(1), pages 161-93, February. [Downloadable!] (restricted)
Hall, Robert E, 1988. "The Relation between Price and Marginal Cost in U.S. Industry," Journal of Political Economy, University of Chicago Press, vol. 96(5), pages 921-47, October. [Downloadable!] (restricted)
Gordon, Robert J, 1984. "Supply Shocks and Monetary Policy Revisited," American Economic Review, American Economic Association, vol. 74(2), pages 38-43, May. [Downloadable!] (restricted)
Other versions:
- Robert J. Gordon, 1986. "Supply Shocks and Monetary Policy Revisited," NBER Working Papers 1301, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
Poterba, James M & Rotemberg, Julio J & Summers, Lawrence H, 1986. "A Tax-Based Test for Nominal Rigidities," American Economic Review, American Economic Association, vol. 76(4), pages 659-75, September. [Downloadable!] (restricted)
Other versions:
- James M. Poterba & Julio J. Rotemberg & Lawrence H. Summers, 1987. "A Tax-Based Test for Nominal Rigidities," NBER Working Papers 1627, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
- James M. Poterba & Julio J. Rotemberg & Lawrence H. Summers, 1985. "A Tax-Based Test for Nominal Rigidities," Working papers 376, Massachusetts Institute of Technology (MIT), Department of Economics.
Rasche, Robert H. & Tatom, John A., 1981. "Energy price shocks, aggregate supply and monetary policy: The theory and the international evidence," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 14(1), pages 9-93, January. [Downloadable!] (restricted)
Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July. [Downloadable!] (restricted)
Other versions:
- Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation, Yale University. [Downloadable!]
Rotemberg, Julio J & Saloner, Garth, 1986. "A Supergame-Theoretic Model of Price Wars during Booms," American Economic Review, American Economic Association, vol. 76(3), pages 390-407, June. [Downloadable!] (restricted)
King, Robert G. & Plosser, Charles I. & Rebelo, Sergio T., 1988. "Production, growth and business cycles : I. The basic neoclassical model," Journal of Monetary Economics, Elsevier, vol. 21(2-3), pages 195-232. [Downloadable!] (restricted)

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