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The beginning of the trend: Interest rates, profits, and markups

Author

Listed:
  • Anton Bobrov

    (University of Michigan)

  • James Traina

    (NYU Stern AD)

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.

Suggested Citation

  • Anton Bobrov & James Traina, 2024. "The beginning of the trend: Interest rates, profits, and markups," Economics Bulletin, AccessEcon, vol. 44(3), pages 1024-1033.
    • Handle: RePEc:ebl:ecbull:eb-24-00111
    as

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    File URL: http://www.accessecon.com/Pubs/EB/2024/Volume44/EB-24-V44-I3-P80.pdf
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    More about this item

    Keywords

    Influential Observations; Sensitivity Analysis; Secular Trends; Interest Rates; Markups;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General

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