Fiscal Episodes and Market Power |
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Authors: | António Afonso João Tovar Jalles |
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Affiliation: | 1.Department of Economics,ISEG/University of Lisbon – University of Lisbon,Lisbon,Portugal;2.UECE – Research Unit on Complexity and Economics,Lisbon,Portugal;3.Center for Globalization and Governance,Nova School of Business and Economics,Lisboa,Portugal |
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Abstract: | We assess the effect of fiscal episodes, as determined via alternative approaches, on GDP and on markups in a panel of 14 OECD countries. Our results with narrative action-based data show counter-cyclicality since negative fiscal shocks increase markups. Additional empirical exercises reveal that spending-based consolidation programs have a more counter-cyclical effect on the behaviour of markups over the short and medium term than tax-based ones. Moreover, in times of economic contraction the degree of counter-cyclicality of negative (positive) government spending (tax) shocks is larger than during economic expansions. |
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