Testing for a time-varying price-cost markup in the Euro area inflation process
Empirical models of inflation often incorporate equilibrium correction effects based upon levels of prices and input costs. Such models assume that the steady-state price-cost markup is constant, but recent research suggests that this may not be true for the Euro area economy, which has undergone major structural reforms over the last 25 years. We allow for permanent shifts in the markup factor through estimating an inflation equation that includes a time-varying intercept. The model suggests that a reduction in the markup contributed to disinflation in the Euro area during the period 1981-2000.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Robert S. Chirinko & Steven M. Fazzari, 2000.
"Market Power and Inflation,"
The Review of Economics and Statistics,
MIT Press, vol. 82(3), pages 509-513, August.
- Eilev S. Jansen, 2004.
"Modelling inflation in the Euro Area,"
Working Paper Series
4104, Department of Economics, Norwegian University of Science and Technology, revised 01 Jun 2004.
- Fagan, Gabriel & Henry, Jérôme & Mestre, Ricardo, 2001. "An area-wide model (AWM) for the euro area," Working Paper Series 0042, European Central Bank.
- Kenneth S. Rogoff, 2003.
"Globalization and global disinflation,"
Proceedings - Economic Policy Symposium - Jackson Hole,
Federal Reserve Bank of Kansas City, pages 77-112.
- Gali, Jordi & Gertler, Mark, 1999.
"Inflation dynamics: A structural econometric analysis,"
Journal of Monetary Economics,
Elsevier, vol. 44(2), pages 195-222, October.
- Jordi Gali & Mark Gertler, 2000. "Inflation Dynamics: A Structural Econometric Analysis," NBER Working Papers 7551, National Bureau of Economic Research, Inc.
- Jordi Galí & Mark Gertler, 1998. "Inflation dynamics: A structural econometric analysis," Economics Working Papers 341, Department of Economics and Business, Universitat Pompeu Fabra.
- Anindya Banerjee & Bill Russell, 2000. "The Relationship between the Markup and Inflation in the G7 Economies and Australia," Dundee Discussion Papers in Economics 119, Economic Studies, University of Dundee.
- Ball, Laurence & Romer, David, 2003.
" Inflation and the Informativeness of Prices,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 35(2), pages 177-196, April.
- Janine Aron & John Muellbauer, 2000. "Inflation and output forecasts for South Africa: monetary transmission implications," CSAE Working Paper Series 2000-23, Centre for the Study of African Economies, University of Oxford.
- Roland Benabou, 1992. "Inflation and Efficiency in Search Markets," Review of Economic Studies, Oxford University Press, vol. 59(2), pages 299-329.
- Gordon de Brouwer & Neil R. Ericsson, 1995.
"Modelling Inflation in Australia,"
RBA Research Discussion Papers
rdp9510, Reserve Bank of Australia.
- Allan W. Gregory & Alfred A. Haug & Nicoletta Lomuto, 2004. "Mixed signals among tests for cointegration," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(1), pages 89-98.
- Anindya Banerjee & Bill Russell, 2000.
"The Relationship Between the Markup and Inflation in the G7 Plus One Economies,"
Econometric Society World Congress 2000 Contributed Papers
0242, Econometric Society.
- Banerjee, A. & Russell, B., 2000. "The Relationship between the Markup and Inflation in the G7 plus One Economies," Economics Working Papers eco2000/7, European University Institute.
- Banerjee, A. & Russell, B., 1999. "The Relationship Between the Markup and Inflation in the G7 Plus One Economies," Economics Series Working Papers 99205, University of Oxford, Department of Economics.
- Harbo, Ingrid, et al, 1998. "Asymptotic Inference on Cointegrating Rank in Partial Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(4), pages 388-399, October.
- Godfrey, Leslie G, 1978. "Testing for Higher Order Serial Correlation in Regression Equations When the Regressors Include Lagged Dependent Variables," Econometrica, Econometric Society, vol. 46(6), pages 1303-1310, November.
- David Bowman, 2003. "Market power and inflation," International Finance Discussion Papers 783, Board of Governors of the Federal Reserve System (U.S.).
- Anders Rahbek & Rocco Mosconi, 1999. "Cointegration rank inference with stationary regressors in VAR models," Econometrics Journal, Royal Economic Society, vol. 2(1), pages 76-91.
- Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
- Nath, Hiranya K., 2004. "Inflation and relative price variability: short-run vs. long-run," Economics Letters, Elsevier, vol. 82(3), pages 363-369, March.
- Bowdler, Christopher & Jansen, Eilev S., 2004. "A markup model of inflation for the euro area," Working Paper Series 0306, European Central Bank.
- Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
- White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-838, May.
- Gwin, Carl R & Taylor, Beck A, 2004. "The Role of Search Costs in Determining the Relationship between Inflation and Profit Margins," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(1), pages 139-149, February.
When requesting a correction, please mention this item's handle: RePEc:nuf:econwp:0410. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Maxine Collett)
If references are entirely missing, you can add them using this form.