Demand, markups and the business cycle

Lilia Cavallari and Federico Etro ()

European Economic Review, 2020, vol. 127, issue C

Abstract: We generalize the demand side of a Real Business Cycle model introducing non-homothetic intratemporal preference aggregators over differentiated final goods. Under monopolistic competition this generates markups which vary with aggregate consumption. We estimate a flexible preference specification through Bayesian methods and obtain results consistent with substitutability across goods that is increasing in consumption. The associated markup variability magnifies the propagation of shocks through additional substitution effects on labor supply and consumption.

Keywords: Business cycle; Non-homothetic preference aggregators; Variable markups; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E1 E2 E3 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0014292120301033
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Demand, Markups and the Business Cycle (2018)
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:eee:eecrev:v:127:y:2020:i:c:s0014292120301033

DOI: 10.1016/j.euroecorev.2020.103471

Access Statistics for this article

European Economic Review is currently edited by T.S. Eicher, A. Imrohoroglu, E. Leeper, J. Oechssler and M. Pesendorfer

More articles in European Economic Review from Elsevier
Bibliographic data for series maintained by Catherine Liu ().