A markup model of inflation for the euro area
Christopher Bowdler and
Eilev Jansen
No 306, Working Paper Series from European Central Bank
Abstract:
Equilibrium correction models of the price level are often used to model inflation. Such models assume that the long-run markup of prices over costs is fixed, but this may not be true for the Euro area economy, which has undergone major structural reforms over the last 25 years. We allow for shifts in the markup factor through estimating an equation that includes a timevarying intercept. The model fits the data better than a linear alternative, and suggests that a reduction in the price-cost markup contributed to disinflation in the Euro area during the 1980s. JEL Classification: C22, C32, E31
Keywords: cointegration; dynamic modelling; inflation; price-cost markup; time-varying intercept (search for similar items in EconPapers)
Date: 2004-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)
Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecbwp306.pdf (application/pdf)
Related works:
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:ecb:ecbwps:2004306
Access Statistics for this paper
More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().