Sector-specific Markup Fluctuations and the Business Cycle

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Show simple item record GABLER, Alain 2007-10-22T16:10:30Z 2007-10-22T16:10:30Z 2007
dc.identifier.issn 1725-6704
dc.description.abstract The counter-cyclicality in the relative price of equipment investment which is observed in the U.S. has been attributed to equipment-specific pro- ductivity shocks. Cross-country evidence indicates that a number of coun- tries experience sizeable delays between a surge in equipment production and a fall in its relative price, which is dfficult to reconcile with sector- specific shocks. I show that in the presence of sector specific, time-varying markups, relative price movements arise as a direct consequence of con- sumption smoothing, even if all shocks are aggregate, while barriers to firm entry lead to delays in relative price responses. A calibrated version of the model explains around one-third of the relative price fluctuations which are observed in the U.S., as well as the qualitative differences in the behaviour of this relative price across countries. en
dc.language.iso en en
dc.publisher European University Institute
dc.relation.ispartofseries EUI ECO en
dc.relation.ispartofseries 2007/25 en
dc.subject E25 en
dc.subject E32 en
dc.subject D43 en
dc.subject Endogenous markups en
dc.subject Firm entry and exit en
dc.subject relative prices en
dc.title Sector-specific Markup Fluctuations and the Business Cycle en
dc.type Working Paper en
dc.neeo.contributor GABLER|Alain|aut|
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