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Modelling cyclical variation in the cost pass-through: evidence from regime-dependent ARDL model

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Abstract

In this study we develop a regime-dependent ARDL model in order to investigate how labour costs feed through into prices conditional on the business cycle position. The estimation results allow us to make inference on the cyclical behaviour of markups. The proposed methodology is applied to Polish industrial sectors. The obtained estimates point to procyclicality as the prevailing pattern of markup adjustment. Thus, overall markups in Polish industry seem to have a mitigating effect on business cycle fluctuations. The degree of procyclicality seems, however, to be positively correlated with the industry's degree of competition.

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  • Konopczak, Karolina, 2019. "Modelling cyclical variation in the cost pass-through: evidence from regime-dependent ARDL model," MF Working Papers 36, Ministry of Finance in Poland.
    • Handle: RePEc:ris:mfplwp:0036
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    More about this item

    Keywords

    Non-linear cointegration; Regime-dependence; Cost pass-through; Markup cyclicality;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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