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Profit margins and business cycles in the Brazilian industry: a panel data study

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  • Marcos Lima
  • Marcelo Resende

Abstract

The paper investigates the relationship between profit margins and business cycle in the Brazilian industry during the 1992-1998 period, taking as reference a dynamic panel data model founded around a conjectural variation framework. The empirical results indicate procyclical behaviour of profit margins for the aggregate business cycle but is less clear in the case of sector-specific business cycle variables. Among the most robust results, one can highlight the roles of lagged profitability and import intensity and the negligible role of union density. Schmalensee in 1985 (American Economic Review 75, pp. 341-51) outlined three theoretical interpretations associated with the empirical model (classical, revisionist and managerial). Econometric tests on the related restrictions do not allow one to exclusively legitimate any of the three interpretations.

Suggested Citation

  • Marcos Lima & Marcelo Resende, 2004. "Profit margins and business cycles in the Brazilian industry: a panel data study," Applied Economics, Taylor & Francis Journals, vol. 36(9), pages 923-930.
  • Handle: RePEc:taf:applec:v:36:y:2004:i:9:p:923-930
    DOI: 10.1080/003684042000233140
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    References listed on IDEAS

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    Cited by:

    1. Turgutlu, Evrim, 2010. "Cyclical behavior of price-cost margins in the Turkish banking industry," Economic Modelling, Elsevier, vol. 27(1), pages 368-374, January.
    2. Aydemir, Resul & Guloglu, Bulent, 2017. "How do banks determine their spreads under credit and liquidity risks during business cycles?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 46(C), pages 147-157.
    3. Gilbert Cette & Rémy Lecat & Ahmed Ould Ahmed Jiddou, 2016. "Margin rate and the cycle: the role of trade openness," Applied Economics, Taylor & Francis Journals, vol. 48(37), pages 3569-3575, August.
    4. Nina Ponikvar & Maks Tajnikar, 2011. "Are the Determinants of Markup Size Industry-Specific? The Case of Slovenian Manufacturing Firms," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 58(2), pages 229-244, June.
    5. Tamminen, Saara & Chang, Han-Hsin, 2012. "Company heterogeneity and mark-up variability," Working Papers 32, VATT Institute for Economic Research.

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