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Markup variation and endogenous fluctuations in the price of investment goods

Max Floetotto, Nir Jaimovich () and Seth Pruitt ()
Authors registered in the RePEc Author Service: Max Flötotto ()

No 968, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: The two sector model presented in this note suggests a simple structural decomposition of movements in the price of investment goods into exogenous and endogenous sources. The endogenous fluctuations arise in the presence of countercyclical markups which vary differently across the consumption and investment sectors. In turn, the movements in the markups are due to endogenous procyclical net business formation. The model, while being consistent with the countercyclicality of the price of investment goods, suggests that about a quarter of the movement in the price series can be attributed to this endogenous mechanism.

Keywords: Stock - Prices; Business cycles (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-dge and nep-mac
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