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Demand, Supply and Markup Fluctuations

Carlos D. Santos, Luís F. Costa and Paulo Brito ()

No 2018/41, Working Papers REM from ISEG - Lisbon School of Economics and Management, REM, Universidade de Lisboa

Abstract: Markup cyclicality has been central for debating policy e§ectiveness and understanding business cycle áuctuations. However, there are two empirical challenges: separating supply (TFP) from demand shocks, and properly measuring the markups. In this article, we use a panel of Portuguese manufacturing Örms for 2004-2014. Since it contains information on product-level prices, we can separate supply from demand shocks. We overcome the markup measurement by using the share of intermediate inputs on revenues,instead of the labor share. Our results suggest that markups are pro-cyclical with TFP shocks, and counter-cyclical with demand shocks. We also show that labor-based markups are pro-cyclical.

Keywords: Markups; Demand Shocks; TFP shocks (search for similar items in EconPapers)
JEL-codes: C23 E32 L16 L22 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
Date: 2018-06
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Working Paper: Demand, Supply and Markup Fluctuations (2016) Downloads
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