Testing for a time-varying price-cost markup in the Euro area inflation process
AbstractEmpirical models of inflation often incorporate equilibrium correction effects based upon levels of prices and input costs. Such models assume that the steady-state price-cost markup is constant, but recent research suggests that this may not be true for the Euro area economy, which has undergone major structural reforms over the last 25 years. We allow for permanent shifts in the markup factor through estimating an inflation equation that includes a time-varying intercept. The model suggests that a reduction in the markup contributed to disinflation in the Euro area during the period 1981-2000.
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Bibliographic InfoPaper provided by Department of Economics, Norwegian University of Science and Technology in its series Working Paper Series with number 4004.
Length: 18 pages
Date of creation: 01 Feb 2004
Date of revision: 11 May 2004
Publication status: Published in ECB Working Paper Series earlier. This paper is a modified version.
inflation; price-cost markup; cointegration; time-varying intercept; dynamic modelling.;
Other versions of this item:
- Christopher Bowdler & Eilev S. Jansen, 2004. "Testing for a time-varying price-cost markup in the Euro area inflation process," Economics Series Working Papers 2004-W10, University of Oxford, Department of Economics.
- Christopher Bowdler & Eilev S. Jansen, 2004. "Testing for a time-varying price-cost markup in the Euro area inflation process," Economics Papers 2004-W10, Economics Group, Nuffield College, University of Oxford.
- Christopher Bowdler & Eilev S. Jansen, 2004. "Testing for a time-varying price-cost markup in the Euro area inlation process," Working Paper 2004/9, Norges Bank.
- Bowdler, Christopher & Jansen, Eilev S., 2004. "Testing for a time-varying price-cost markup in the Euro area inflation process," University of California at San Diego, Economics Working Paper Series qt4s75w541, Department of Economics, UC San Diego.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
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