Further results on monopolistic competition,markup pricing and the business cycle in Switzerland

This paper investigates how firms’ market power affects the price level. Based on a small macro-model it is shown empirically that firms have structural markup pricing power and take advantage of favourable business cycle fluctuations. To this aim, a multivariate time series model with double integrated variables is estimated. Thereby a model-based business cycle indicator can be derived. Its information content is confronted with survey data giving rise to what is going to be called semantic cross validation approach.

Christian MüllerEmail: Phone: +41-44-6324624Fax: +41-44-6321218