Markup Variation and Endogenous Fluctuations in the Price of Investment Goods
23 Pages Posted: 16 Jun 2009
Date Written: March 31, 2009
Abstract
The two sector model presented in this note suggests a simple structural decomposition of movements in the price of investment goods into exogenous and endogenous sources. The endogenous fluctuations arise in the presence of countercyclical markups which vary differently across the consumption and investment sectors. In turn, the movements in the markups are due to endogenous procyclical net business formation. The model, while being consistent with the countercyclicality of the price of investment goods, suggests that about a quarter of the movement in the price series can be attributed to this endogenous mechanism.
Keywords: Price of investment, business cycle, firm dynamics, markup
JEL Classification: E32, L11, L16
Suggested Citation: Suggested Citation
Do you want regular updates from SSRN on Twitter?
Recommended Papers
-
Can News About the Future Drive the Business Cycle?
By Nir Jaimovich and Sergio T. Rebelo
-
Can News About the Future Drive the Business Cycle?
By Nir Jaimovich and Sergio T. Rebelo
-
Stock Prices, News and Economic Fluctuations
By Paul Beaudry and Franck Portier
-
Stock Prices, News and Economic Fluctuations
By Paul Beaudry and Franck Portier
-
An Exploration into Pigou's Theory of Cycles
By Paul Beaudry and Franck Portier
-
Monetary Policy and Stock Market Boom-Bust Cycles
By Lawrence J. Christiano, Cosmin L. Ilut, ...
-
Time-Separable Preference and Intertemporal-Substitution Models of Business Cycles
By Robert J. Barro and Robert G. King
-
Monetary Policy and Stock Market Booms
By Lawrence J. Christiano, Cosmin L. Ilut, ...
-
Monetary Policy and Stock Market Booms
By Lawrence J. Christiano, Cosmin L. Ilut, ...