Demand shocks and markup fluctuations: an evaluation of the implicit collusion model

Chocs de demande et fluctuations du taux de marge: une évaluation du modèle de collusion implicite

Frédéric Dufourt
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Frédéric Dufourt: UP1 - Université Paris 1 Panthéon-Sorbonne

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Abstract: Summary In this article, I propose a quantitative evaluation of Rotemberg and Woodford's model of implicit collusion, which is based upon a fully specified version which allows an analytic determination of the markup elasticity with respect to aggregate demand variations. In this framework, it is shown that such a mechanism is unable to generate sufficient real effects to account for some important stylized facts associated to demand shocks, such as the procyclical behavior of output, employment and the real wage in response to public spending variations. Compared with competing mechanisms of markup fluctuations evaluated with the same analytical framework, the mechanism of implicit collusion seems therefore to have difficulties to assert itself as a leading explanation for the transmission of aggregate demand shocks to economic activity.

Date: 2001-01-01
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Published in Recherches Economiques de Louvain - Louvain economic review, 2001, 67 (1), pp.91-111. ⟨10.1017/S0770451800055809⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05661823

DOI: 10.1017/S0770451800055809

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