Market power and fiscal policy in OECD countries |
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| Authors: | António Afonso Luís F. Costa |
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| Affiliation: | 1. ISEG (School of Economics and Management), Universidade Técnica de Lisboa, Lisboa, Portugal;2. UECE (Research Unit on Complexity and Economics), Lisboa, Portugal;3. European Central Bank, Directorate General Economics, Frankfurt am Main, Germanyaafonso@iseg.utl.pt |
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| Abstract: | We compute average markups as a measure of market power throughout time and study their interaction with fiscal policy and macroeconomic variables in a VAR framework. From impulse-response functions, the results, with annual data for a set of 14 OECD countries, show that the markup (i) depicts a pro-cyclical behaviour with productivity shocks and (ii) a counter-cyclical behaviour with fiscal spending shocks. We also use a PVAR, increasing the efficiency in the estimations, which confirms the country-specific results. |
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| Keywords: | fiscal policy markup VAR PVAR |
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