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Market power and fiscal policy in OECD countries

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  • António Afonso
  • Luís F. Costa

Abstract

We compute average markups as a measure of market power throughout time and study their interaction with fiscal policy and macroeconomic variables in a VAR framework. From impulse-response functions, the results, with annual data for a set of 14 OECD countries, show that the markup (i) depicts a pro-cyclical behaviour with productivity shocks and (ii) a counter-cyclical behaviour with fiscal spending shocks. We also use a PVAR, increasing the efficiency in the estimations, which confirms the country-specific results.

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File URL: http://hdl.handle.net/10.1080/00036846.2013.795275
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 45 (2013)
Issue (Month): 32 (November)
Pages: 4545-4555

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Handle: RePEc:taf:applec:v:45:y:2013:i:32:p:4545-4555

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Citations

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Cited by:
  1. Peter Claeys & Luis Costa, 2012. "“A Note on the Relationship Between the Cyclicality of Markups and Fiscal Policy”," IREA Working Papers 201215, University of Barcelona, Research Institute of Applied Economics, revised Sep 2012.
  2. Costa, Luís F. & Dixon, Huw David, 2010. "Fiscal policy under imperfect competition: A survey," Economics Discussion Papers 2010-14, Kiel Institute for the World Economy.
  3. Ali Abcha, 2014. "Imperfect competition, government spending and estimated markup," EconomiX Working Papers 2014-11, University of Paris West - Nanterre la Défense, EconomiX.
  4. Juessen, Falko & Linnemann, Ludger, 2012. "Markups and fiscal transmission in a panel of OECD countries," Journal of Macroeconomics, Elsevier, vol. 34(3), pages 674-686.

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