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The Markup and the Business Cycle Reconsidered

Author

Listed:
  • Banerjee, A.
  • Russell, B.

Abstract

A fresh interpretaion is provided of the influential finding that the markup of prices over marginal costs is counter-cyclical. Using Rotemberg and Woodford's data set we argue that the markup is best modelled as a variable that is integrated of order one. A consequence of this finding is that the markup cannot be related in the long run with business-cycle variables since these are traditionally thought of as being stationary.

Suggested Citation

  • Banerjee, A. & Russell, B., 2000. "The Markup and the Business Cycle Reconsidered," Economics Working Papers eco2000/21, European University Institute.
    • Handle: RePEc:eui:euiwps:eco2000/21
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    Citations

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    Cited by:

    1. Anindya Banerjee, 2001. "Industry structure and the dynamics of price adjustment," Applied Economics, Taylor & Francis Journals, vol. 33(15), pages 1889-1901.
    2. Banerjee, Anindya & Russell, Bill, 2005. "Inflation and measures of the markup," Journal of Macroeconomics, Elsevier, vol. 27(2), pages 289-306, June.

    More about this item

    Keywords

    INFLATION ; PRICES ; PRODUCTIVITY;
    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
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • 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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