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Market Power and Fiscal Policy in OECD Countries

  • António Afonso
  • Luís Costa

We compute average mark-ups 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 covering the period 1970-2007, show that the mark-up (i) depicts a pro-cyclical behaviour with productivity shocks and (ii) a mostly counter-cyclical behaviour with fiscal spending shocks. We also use a Panel Vector Auto-Regression analysis, increasing the efficiency in the estimations, which confirms the country-specific results.

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Paper provided by ISEG - School of Economics and Management, Department of Economics, University of Lisbon in its series Working Papers Department of Economics with number 2010/11.

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Date of creation: Jun 2010
Date of revision:
Handle: RePEc:ise:isegwp:wp112010
Contact details of provider: Postal: Department of Economics, ISEG - School of Economics and Management, University of Lisbon, Rua do Quelhas 6, 1200-781 LISBON, PORTUGAL
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