Barro, Robert J. and Tenreyro, Silvana 
ORCID: 0000-0002-9816-7452
(2006)
Closed and open economy models of business cycles with marked up and sticky prices.
The Economic Journal, 116 (511).
pp. 434-456.
ISSN 0013-0133
Abstract
Shifts in the extent of competition, which affect markups, are possible sources of aggregate fluctuations. Markups are countercyclical; during booms the economy operates more efficiently. In our benchmark model, markups correspond to the prices of differentiated inputs relative to that of undifferentiated final product. If nominal prices of differentiated goods are relatively sticky, unexpected inflation reduces markups, mimicking the effects of increased competition. Similar effects stem from reductions in markups of foreign intermediates and unexpected inflation abroad. The models imply that prices of less competitive goods are more countercyclical. We find support for this hypothesis using data of four-digit manufacturing industries.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.blackwell-synergy.com/loi/ecoj |
| Additional Information: | © 2006 Royal Economic Society |
| Divisions: | Centre for Economic Performance Economics |
| Subjects: | H Social Sciences > HB Economic Theory |
| Date Deposited: | 22 May 2008 10:25 |
| Last Modified: | 01 Nov 2024 04:18 |
| URI: | http://eprints.lse.ac.uk/id/eprint/4986 |
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