| Abstract: | Sectoral and Aggregate Estimates of the Cyclical Behavior of Mark-ups: Evidence from Germany. — The paper presents evidence of the cyclical behavior of the price to marginal cost ratio for Germany. Average markups are estimated both for two-digit manufacturing industries and for the aggregate economy, the results being quite similar once the difference between gross output and and value-added markups is accounted for. Over the business cycle, markups appear to be countercyclical for most parameter constellations. This is interpreted as empirical support for business cycle theories that rely on aggregate demand shocks to affect markups inversely, thus producing procyclical real wages and productivity without having to assume technology shocks. |
