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The Beginning of the Trend: Interest Rates, Profits, and Markups

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  • Anton Bobrov
  • James Traina

Abstract

Recent highly cited research uses time-series evidence to argue the decline in interest rates led to a large rise in economic profits and markups. We show the size of these estimates is sensitive to the sample start date: The rise in markups from 1984 to 2019 is 14% larger than from 1980 to 2019, a difference amounting to a $3000 change in income per worker in 2019. The sensitivity comes from a peak in interest rates in 1984, during a period of heightened volatility. Our results imply researchers should justify their time-series selection and incorporate sensitivity checks in their analysis.

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  • Anton Bobrov & James Traina, 2023. "The Beginning of the Trend: Interest Rates, Profits, and Markups," Papers 2307.08968, arXiv.org, revised Oct 2023.
    • Handle: RePEc:arx:papers:2307.08968
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