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Profit margins and business cycles in the Brazilian industry: a panel data study

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The paper investigates the relationship between profit margins and business cycle in the Brazilian industry during the 1992-1998 period, taking as reference a dynamic panel data model founded around a conjectural variation framework. The empirical results indicate procyclical behaviour of profit margins for the aggregate business cycle but is less clear in the case of sector-specific business cycle variables. Among the most robust results, one can highlight the roles of lagged profitability and import intensity and the negligible role of union density. Schmalensee in 1985 (American Economic Review 75, pp. 341-51) outlined three theoretical interpretations associated with the empirical model (classical, revisionist and managerial). Econometric tests on the related restrictions do not allow one to exclusively legitimate any of the three interpretations.

Document Type: Research Article


Affiliations: 1: IBMEC - RJ Av. Rio Branco 108 20040-001 Rio de Janeiro-RJ Brazil 2: Instituto de Economia Universidade Federal do Rio de Janeiro Av. Pasteur 250 Urca 22290-240 Rio de Janeiro-RJ Brazil

Publication date: 2004-05-01

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