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Market power and fiscal policy in OECD countries

  • António Afonso
  • Luís F. Costa

We compute average markups as a measure of market power throughout time and study their interaction with fiscal policy and macroeconomic variables in a VAR framework. From impulse-response functions, the results, with annual data for a set of 14 OECD countries, show that the markup (i) depicts a pro-cyclical behaviour with productivity shocks and (ii) a counter-cyclical behaviour with fiscal spending shocks. We also use a PVAR, increasing the efficiency in the estimations, which confirms the country-specific results.

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File URL: http://hdl.handle.net/10.1080/00036846.2013.795275
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 45 (2013)
Issue (Month): 32 (November)
Pages: 4545-4555

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Handle: RePEc:taf:applec:v:45:y:2013:i:32:p:4545-4555
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