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The contribution of firm profits to the recent rise in inflation

Author

Listed:
  • Bouras, Panagiotis
  • Bustamante, Christian
  • Guo, Xing
  • Short, Jacob

Abstract

We measure the contribution to inflation from the growth in markups of Canadian firms. The dynamics of inflation and markups suggest that changes in markups could account for less than one-tenth of inflation in 2021. Further, they suggest that peak inflation was driven primarily by changes in firms’ costs.

Suggested Citation

  • Bouras, Panagiotis & Bustamante, Christian & Guo, Xing & Short, Jacob, 2023. "The contribution of firm profits to the recent rise in inflation," Economics Letters, Elsevier, vol. 233(C).
    • Handle: RePEc:eee:ecolet:v:233:y:2023:i:c:s0165176523004755
    DOI: 10.1016/j.econlet.2023.111449
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    References listed on IDEAS

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    1. Mr. Niels-Jakob H Hansen & Mr. Frederik G Toscani & Jing Zhou, 2023. "Euro Area Inflation after the Pandemic and Energy Shock: Import Prices, Profits and Wages," IMF Working Papers 2023/131, International Monetary Fund.
    2. Olga Bilyk & Timothy Grieder & Mikael Khan, 2023. "Markups and inflation during the COVID-19 pandemic," Staff Analytical Notes 2023-8, Bank of Canada.
    3. Jan De Loecker & Jan Eeckhout & Gabriel Unger, 2020. "The Rise of Market Power and the Macroeconomic Implications [“Econometric Tools for Analyzing Market Outcomes”]," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 135(2), pages 561-644.
    4. Andrew Glover & Jose Mustre-del-Rio & Alice von Ende-Becker, 2023. "How Much Have Record Corporate Profits Contributed to Recent Inflation?," Economic Review, Federal Reserve Bank of Kansas City, vol. 0(no.1), pages 1-13, January.
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    More about this item

    Keywords

    Inflation; Markups; Firm pricing; Market structure and pricing;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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