The Markup and the Business Cycle Reconsidered

A. Banerjee and B. Russell

Economics Working Papers from European University Institute

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.

Keywords: INFLATION; PRICES; PRODUCTIVITY (search for similar items in EconPapers)
JEL-codes: C22 C32 C52 D40 E31 E32 (search for similar items in EconPapers)
Date: Written 2000
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Persistent link: http://EconPapers.repec.org/RePEc:eui:euiwps:eco2000/21

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