The beginning of the trend: Interest rates, profits, and markups

Anton Bobrov () and James Traina ()
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Anton Bobrov: University of Michigan
James Traina: NYU Stern AD

Economics Bulletin, 2024, vol. 44, issue 3, 1024 - 1033

Abstract: Recent highly cited research uses time-series evidence to argue the decline in interest rates led to a large rise in economic profits and markups. We show the size of these estimates is sensitive to the sample start date: The rise in markups from 1984 to 2019 is 14% larger than from 1980 to 2019, a difference amounting to a $3000 change in income per worker in 2019. The sensitivity comes from a peak in interest rates in 1984, during a period of heightened volatility. Our results imply researchers should justify their time-series selection and incorporate sensitivity checks in their analysis.

Keywords: Influential Observations; Sensitivity Analysis; Secular Trends; Interest Rates; Markups (search for similar items in EconPapers)
JEL-codes: C1 E2 (search for similar items in EconPapers)
Date: 2024-09-30
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