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Has the Globalisation really generated more competition in OECD economies

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  • Jambu, Marc-Antoine
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    Abstract

    Globalisation have generated a more or less competetive market according to the kind of rms. The Great moderation has structural causes such as market power, which is possible to study through the reduced form of the NKPC obtained with the Calvo and Rotemberg price setting assumptions. The Calvo model fails to predict the increase of price volatility on Business to Business (BotB) product markets where competition has denitively increased. By using a model with upstream and downstream rms, according to the Theory of rm Literature, where both are constraint by the Rotemberg price setting assumption, the model predicts the Great Moderation in OECD economies only if the hypothesis of an increase in the global markup is kept. Simulations replicate NKPC slope empirical estimations. This unusual hypothesis is supported by the increasing share of prot in value added, by the development of credit market in OECD countries and by the american increasing revenues inequalities. The model produces endogeneous incentives to a more exible labor market and the development of credit market. A global decreased competetive market gives an explanation of the barely growth of median wage, compare to the growth of global productivity during the period of the Great Moderation.

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    Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 19974.

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    Date of creation: 07 Jan 2010
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    Handle: RePEc:pra:mprapa:19974

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    Keywords: Great Moderation; New keynesian model; Market structure;

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    1. Bezemer, Dirk J, 2009. "Explaining the Great Moderation: Credit in the Macroeconomy Revisited," MPRA Paper 15893, University Library of Munich, Germany.
    2. Lombardo, Giovanni & Vestin, David, 2007. "Welfare implications of Calvo vs. Rotemberg pricing assumptions," Working Paper Series, European Central Bank 0770, European Central Bank.
    3. Benati, Luca, 2007. "The ‘Great Moderation’ in the United Kingdom," Working Paper Series, European Central Bank 0769, European Central Bank.
    4. Galí, Jordi & Gambetti, Luca, 2008. "On the Sources of the Great Moderation," CEPR Discussion Papers, C.E.P.R. Discussion Papers 6632, C.E.P.R. Discussion Papers.
    5. Domenico Giannone & Michele Lenza & Lucrezia Reichlin, 2008. "Explaining The Great Moderation: It Is Not The Shocks," Journal of the European Economic Association, MIT Press, MIT Press, vol. 6(2-3), pages 621-633, 04-05.
    6. Zheng Liu & Daniel F. Waggoner & Tao Zha, 2009. "Sources of the Great Moderation: shocks, friction, or monetary policy?," Working Paper Series, Federal Reserve Bank of San Francisco 2009-01, Federal Reserve Bank of San Francisco.
    7. Pedro Silos & Karsten Jeske & Rajeev Dhawan, 2008. "Productivity, Energy Prices and the Great Moderation: A New Link," 2008 Meeting Papers 877, Society for Economic Dynamics.
    8. Calvo, Guillermo A., 1983. "Staggered prices in a utility-maximizing framework," Journal of Monetary Economics, Elsevier, Elsevier, vol. 12(3), pages 383-398, September.
    9. Steven J. Davis & James A. Kahn, 2008. "Interpreting the Great Moderation: Changes in the Volatility of Economic Activity at the Macro and Micro Levels," NBER Working Papers 14048, National Bureau of Economic Research, Inc.
    10. Julio Rotemberg, 1987. "The New Keynesian Microfoundations," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER Macroeconomics Annual 1987, Volume 2, pages 69-116 National Bureau of Economic Research, Inc.
    11. Peter M. Summers, 2005. "What caused the Great Moderation? : some cross-country evidence," Economic Review, Federal Reserve Bank of Kansas City, Federal Reserve Bank of Kansas City, issue Q III, pages 5-32.
    12. Dew-Becker, Ian & Gordon, Robert J, 2005. "Where did the Productivity Growth Go? Inflation Dynamics and the Distribution of Income," CEPR Discussion Papers, C.E.P.R. Discussion Papers 5419, C.E.P.R. Discussion Papers.
    13. Rotemberg, Julio J, 1982. "Monopolistic Price Adjustment and Aggregate Output," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 49(4), pages 517-31, October.
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