Closed and Open Economy Models of Business Cycles with Marked Up and Sticky Prices

Robert Barro and Silvana Tenreyro

Economic Journal, 2006, vol. 116, issue 511, 434-456

Abstract: Shifts in the extent of competition, which affect markups, are possible sources of aggregate fluctuations. Markups are countercyclical; during booms the economy operates more efficiently. In our benchmark model, markups correspond to the prices of differentiated inputs relative to that of undifferentiated final product. If nominal prices of differentiated goods are relatively sticky, unexpected inflation reduces markups, mimicking the effects of increased competition. Similar effects stem from reductions in markups of foreign intermediates and unexpected inflation abroad. The models imply that prices of less competitive goods are more countercyclical. We find support for this hypothesis using data of four-digit manufacturing industries. Copyright 2006 Royal Economic Society.

Date: 2006
References: Add references at CitEc
Citations: View citations in EconPapers (24)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Closed and open economy models of business cycles with marked-up and sticky prices (2001)
Working Paper: Closed and Open Economy Models of Business Cycles with Marked Up and Sticky Prices (2000)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecj:econjl:v:116:y:2006:i:511:p:434-456

Ordering information: This journal article can be ordered from
http://www.blackwell ... al.asp?ref=0013-0133

Access Statistics for this article

Economic Journal is currently edited by Martin Cripps, Steve Machin, Woulter den Haan, Andrea Galeotti, Rachel Griffith and Frederic Vermeulen

More articles in Economic Journal from Royal Economic Society Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().