Testing for a time-varying price-cost markup in the Euro area inflation process

Christopher Bowdler () and Eilev Jansen

No 2004-W10, Economics Papers from Economics Group, Nuffield College, University of Oxford

Abstract: Empirical models of inflation often incorporate equilibrium correction effects based upon levels of prices and input costs. Such models assume that the steady-state price-cost markup is constant, but recent research suggests that this may not be true for the Euro area economy, which has undergone major structural reforms over the last 25 years. We allow for permanent shifts in the markup factor through estimating an inflation equation that includes a time-varying intercept. The model suggests that a reduction in the markup contributed to disinflation in the Euro area during the period 1981-2000.

Keywords: Inflation; price-cost markup; cointegration; time-varying intercept; dynamic modelling. (search for similar items in EconPapers)
JEL-codes: C22 C32 E31 (search for similar items in EconPapers)
Pages: 18 pages
Date: 2004-04-30
New Economics Papers: this item is included in nep-eec and nep-mon
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Testing for a time-varying price-cost markup in the Euro area inlation process (2004)
Working Paper: Testing for a time-varying price-cost markup in the Euro area inflation process (2004)
Working Paper: Testing for a time-varying price-cost markup in the Euro area inflation process (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:nuf:econwp:0410

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