The Cyclical Behavior of the Markups in the New Keynesian Models

Jean Blaise Nlemfu Mukoko

MPRA Paper from University Library of Munich, Germany

Abstract: Different methods have been used in the literature to mesure and analyze price markup cyclical behavior. We use a medium-scale DSGE Model with positive trend in ation, in which aggregate fluctuations are driven by neutral technology, marginal efficiency of investment (MEI) and monetary policy shocks and, where both price and wage markups vary. We find that when raising trend inflation from 0 to 4 percent, wage markup is more important than price markup in explaining the dynamics effects of shocks. Thus, the interactions between positive trend inflation and MEI shocks have greater cyclical effects on wage markup than on price markup. These results put into question the focus on the price markup cyclicality in the literature which ignore the implications of trend inflation.

Keywords: Markups; cyclicality; New Keynesian Models (search for similar items in EconPapers)
JEL-codes: E31 E32 (search for similar items in EconPapers)
Date: 2015-06, Revised 2016-05
New Economics Papers: this item is included in nep-dge, nep-ger and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:72478

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