An I(2) Analysis of Inflation and the Markup
Journal of Applied Econometrics, 2001, 16, 3, 221-240
BANERJEE, Anindya, COCKERELL, Lynne, RUSSELL, Bill, An I(2) Analysis of Inflation and the Markup, Journal of Applied Econometrics, 2001, 16, 3, 221-240 - https://hdl.handle.net/1814/16749
Retrieved from Cadmus, EUI Research Repository
An I(2) analysis of Australian inflation and the markup is undertaken within an imperfect competition model. It is found that the levels of prices and costs are best characterized as integrated of order 2 and that a linear combination of the levels (which may be defined as the markup) cointegrates with price inflation. From the empirical analysis we obtain a long-run relationship where higher inflation is associated with a lower markup and vice versa. The impact in the long run of inflation on the markup is interpreted as the cost to firms of overcoming missing information when adjusting prices in an inflationary environment. Copyright (C) 2001 John Wiley & Sons, Ltd.
Cadmus permanent link: https://hdl.handle.net/1814/16749
Full-text via DOI: 10.1002/jae.609
Earlier different version: http://hdl.handle.net/1814/671
Version: The article is a published version of EUI ECO WP; 1998/26
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