The Markup Flexibility and Inflation: a Case Study of a Large Public Entreprise

J.G. Loranger

Cahiers de recherche from Universite de Montreal, Departement de sciences economiques

Abstract: This Paper Goes Against the Current That, When Price Ae Determined From a Markup, Labor Is the Main Cause for Inflation. It Will Be Shown on the Contrary That Capital, Under Its Physical Anf Financial Form, Is the Main Culprit for Inflation. the Main Hypothesis to Be Tested Is That in Time of Crisis, There Is a Divergence Between Debts the Value of Social Capital; and Such a Divergence Puts Upward Pressure on the Markup Coefficient. the Markup Flexibility Opens the Door to Greater Financial Commitments to Be Paid and to Higher Depreciation Rate. in Time of Crisis, State Controlled Entreprises Such As Telmex Tend to Behave More Like Profit Maximizer Than Sale Maximizer. the Empirical Tests Are Conducted From a Two Equation Model: a Price Equation Based on a Flexible Markup Coefficient and a Markup Equation Which Is Expressed in Terms of the Relative Price of Physical and Financial Capital with Espect to the Wage Rate. the Best Results Are Obtained From the Reduced Form of the Price Equation Expressed in Log Form. Under the Hypothesis of Neutral Productivity Change, the Responsability of Capital with Respect to Inflation Would Be Between 75% and 90%.

Keywords: Inflation; Labour; Catal; Financing; Produ Ctivity (search for similar items in EconPapers)
Date: Written 1988

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Persistent link: http://EconPapers.repec.org/RePEc:mtl:montde:8805

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