Tag Archive for 'markup'

Unemployment in an Estimated New Keynesian Model

Published on 01 Jun 2011 in academic, news and research. 0 Comments Tags: DSGE, markup, New Keynesian, research, unemployment.

by Jordi Gali, Frank Smets, Rafael Wouters - #17084 (EFG ME)

Abstract:

We reformulate the Smets-Wouters (2007) framework by embedding the theory of unemployment proposed in Gali (2011a,b). We estimate the resulting model using postwar U.S. data, while treating the unemployment rate as an additional observable variable. Our approach overcomes the lack of identification of wage markup and labor supply shocks highlighted by Chari, Kehoe and McGrattan (2008) in their criticism of New Keynesian models, and allows us to estimate a “correct” measure of the output gap. In addition, the estimated model can be used to analyze the sources of unemployment fluctuations.

http://papers.nber.org/papers/W17084

A step in the right direction. (This paper has been out for a while, but is finally an NBER working paper. )

Updated drafts of markup and industry papers

Published on 10 Jul 2010 in academic and research. 0 Comments Tags: academic, cyclicality, government, industry, LPD, markup, microdata, research.

We have posted updated drafts of our markup paper and our industry evidence paper.

In our markup paper, “The Cyclical Behavior of the Price-Cost Markup,” we re-estimated our marginal change in overtime hours using microdata from my Londitudinal Population Databse (LPD). We still find that markups are procyclical or acyclical, both unconditionally and conditional on demand shocks.

In our industry paper, “Industry Evidence on the Effects of Government Spending,” we significantly updated the theory and discussion, explored other industry characteristics associated such as unionization and concentration, and added analysis of the dynamic interactions. We now discuss how the growth of government spending across industries is correlated with technology and show how accounting for this correlation is essential for constructing a proper instrument for government demand.

Copies of either paper can be downloaded from my research page.

Updated version of markup paper

Published on 02 Mar 2010 in academic and research. 0 Comments Tags: academic, cyclicality, markup, presentation, research.

We have updated our working paper, “The Cyclical Behavior of the Price-Cost Markup.” This version will presented at the 2010 International Research Forum on Monetary Policy on March 26-27, 2010.

You can download a copy of the paper from the link above or on my Research page.

Updated draft of markup cyclicality paper

Published on 11 Sep 2009 in academic and research. 0 Comments Tags: academic, CPS, cyclicality, economics, industry, markup, research.

We have updated our paper “The Cyclicality of the Price-Cost Markup”. You can download the revised version directly here or on my research page.

The Cyclical Behavior of the Price-Cost Markup

Published on 31 Jul 2009 in academic and research. 0 Comments Tags: academic, CPS, cyclicality, economics, industry, markup, research.

Valerie Ramey and I have posted a draft of our new working paper, “The Cyclical Behavior of the Price-Cost Markup.” In it we present considerable evidence that markups are significantly procyclical, contrary to the stylized fact that markups are countercyclical.

Here is the abstract:

Countercyclical markups constitute the key transmission mechanism for monetary and other “demand” shocks in New Keynesian models. This paper tests the foundation of those models by studying the cyclical properties of the markup of price over marginal cost. The first part of the paper studies markups in the aggregate economy and the manufacturing sector. We use Bils’ (1987) insights for converting average cost to marginal cost, but do so with richer data. We find that all measures of markups are either procyclical or acyclical. Moreover, we show that monetary shocks lead markups to fall with output. The second part of the paper merges input-output information on shipments to the government with detailed industry data to study the effect of demand changes on industry-level markups. Industry-level markups are found to be decidedly procyclical in response to demand changes.