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Market power and monetary policy transmission

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Listed:
  • Romain Duval
  • Davide Furceri
  • Raphaël Lee
  • Marina M. Tavares

Abstract

We show that firms' market power dampens the response of their output to monetary policy shocks, using firm‐level data for the USA and a large cross‐country firm‐level dataset for 14 advanced economies. We also find some evidence that the role of markups in monetary policy transmission, while independent from other channels, is greater for firms whose characteristics—notably size and age—are likely to be associated with greater financial constraints.

Suggested Citation

  • Romain Duval & Davide Furceri & Raphaël Lee & Marina M. Tavares, 2024. "Market power and monetary policy transmission," Economica, London School of Economics and Political Science, vol. 91(362), pages 669-700, April.
    • Handle: RePEc:bla:econom:v:91:y:2024:i:362:p:669-700
    DOI: 10.1111/ecca.12512
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    3. Viacheslav Kramkov, 2023. "Does CPI disaggregation improve inflation forecast accuracy?," Bank of Russia Working Paper Series wps112, Bank of Russia.
    4. repec:ecb:ecbdps:202117 is not listed on IDEAS
    5. Anastasia Burya & Rui Mano & Mr. Yannick Timmer & Miss Anke Weber, 2022. "Monetary Policy Under Labor Market Power," IMF Working Papers 2022/128, International Monetary Fund.
    6. Rakshit, Bijoy & Bardhan, Samaresh, 2023. "Does bank competition affect the transmission mechanism of monetary policy through bank lending channel? Evidence from India," Journal of Asian Economics, Elsevier, vol. 86(C).
    7. Ferrando, Annalisa & McAdam, Peter & Petroulakis, Filippos & Vives, Xavier, 2021. "Product market structure and monetary policy: evidence from the Euro Area," Working Paper Series 2632, European Central Bank.
    8. Renzhi, Nuobu & Beirne, John, 2023. "Corporate market power and monetary policy transmission in Asia," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    9. repec:ecb:ecbdps:202115 is not listed on IDEAS

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