Non-Stationary Inflation and the Markup: an Overview of the Research and some Implications for Policy
Bill Russell ()
No 191, Dundee Discussion Papers in Economics from Economic Studies, University of Dundee
This paper reports on research into the negative relationship between inflation and the markup. It is argued that this relationship can be thought of as ‘long-run’ in nature which suggests that inflation has a persistent effect on the markup and, therefore, the real wage. A ‘rule of thumb’ from the estimates indicate that a 10 percentage point increase in inflation (as occurred worldwide in the 1970s) is associated with around a 7 per cent fall in the markup accompanied by a similar increase in the real wage. It is argued that movements of this magnitude in the markup and the real wage will have important implications for a range of economic outcomes such as unemployment, employment and investment.
Keywords: Inflation; Wages; Prices; Markup; Monetary Policy; Competition (search for similar items in EconPapers)
JEL-codes: C22 C32 C52 E24 E31 (search for similar items in EconPapers)
Pages: 28 pages
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