Pricing over the Cycle |
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Authors: | Bloch Harry Olive Michael |
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Institution: | (1) Department of Economics, Curtin University of Technology, GPO Box U 1987, Perth, 6845, Australia |
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Abstract: | In recent studies, the cyclical behavior of markups is examined, but the role of costs in determining markups is ignored. Here, a pricing equation is estimated that implicitly measures the rate of change in markup as a function of aggregate demand growth, aggregate inflation and industry cost inflation. Results for 21 two-digit SIC industries in the U.S. over 1948 to 1979 show incomplete pass-through from cost into price, implying a negative relationship between cost and the markup. Aggregate inflation positively influences prices and markups. Aggregate demand negatively influences prices and markups in highly concentrated industries, but not otherwise. |
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Keywords: | Business cycle price-cost markups pricing |
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