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Manufacturing price determination in OECD countries; markups, demand and uncertainty in a dynamic heterogeneous panel

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  • Price, Simon

    (Bank of England)

  • Dimitrios Asteriou
  • Peter Lukacs
  • Nigel Pain

Abstract

Manufacturing price markup equations are estimated for 15 OECD countries using annual data. Firms have CES production technology. The markup depends on demand, competitors' prices and uncertainty. Cointegration is tested with the Pedroni tests and a panel version of the Johansen test, and evidence found for unique cointegrating vectors. Estimation of the long-run parameters is performed with a pooled mean group method, with short run heterogeneous dynamics. Tests for homogeneity of the long-run parameters do not reject the hypothesis. Markups are pro-cyclical and rise with both competitors' prices and uncertainty.

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Bibliographic Info

Paper provided by Royal Economic Society in its series Royal Economic Society Annual Conference 2003 with number 168.

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Date of creation: 04 Jun 2003
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Handle: RePEc:ecj:ac2003:168

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Web page: http://www.res.org.uk/society/annualconf.asp
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Related research

Keywords: pricing behaviour; markups; panel test for order of integration; panel cointegration; dynamic heterogeneous panels; pooled mean group estimation;

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Cited by:
  1. Byung-Yeon Kim & Iikka Korhonen, 2002. "Equilibrium Exchange Rates in Transition Countries: Evidence from Dynamic Heterogeneous Panel Models," Macroeconomics 0212014, EconWPA.
  2. Bjørnstad, Roger & Kalstad, Kjartan Øren, 2010. "Increased price markup from union coordination: OECD panel evidence," Economics Discussion Papers 2010-13, Kiel Institute for the World Economy.
  3. Colin Ellis & Simon Price, 2003. "The impact of price competitiveness on UK producer price behaviour," Bank of England working papers 178, Bank of England.

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