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Declining Output Volatility in Germany: Impulses, Propagation, and the Role of Monetary Policy

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  • Ulrich Fritsche
  • Vladimir Kuzin

Abstract

This paper investigates the effect of economic integration on the ability of firms to maintain a collusive understanding about staying out of each other's markets. The paper distinguishes among different types of trade costs: ad valorem, unit, fixed. It is shown that for a sufficient reduction of ad valorem trade costs, a cartel supported by collusion on either quantities or prices will be weakened, thus integration is pro-competitive. If integration consists of a reductions in unit (fixed) trade costs a price setting cartel is strengthened (unaffected), while a quantity setting one is weakened.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.41972.de/dp433.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 433.

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Length: 27 p.
Date of creation: 2004
Date of revision:
Handle: RePEc:diw:diwwpp:dp433

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Keywords: Output; Volatility; Monetary policy; Markov switching model; State space model; Spectral analysis; DSGE model;

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References

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  1. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230 National Bureau of Economic Research, Inc.
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Cited by:
  1. Liesenfeld, Roman & Hogrefe, Jens & Aßmann, Christian, 2005. "The Decline in German Output Volatility: A Bayesian Analysis," Economics Working Papers 2006,02, Christian-Albrechts-University of Kiel, Department of Economics.

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