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Market power and fiscal policy in OECD countries

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Abstract:

We compute average markups as a measure of market power throughout time and study their interaction with fiscal policy and macroeconomic variables in a VAR framework. From impulse-response functions, the results, with annual data for a set of 14 OECD countries, show that the markup (i) depicts a pro-cyclical behaviour with productivity shocks and (ii) a counter-cyclical behaviour with fiscal spending shocks. We also use a PVAR, increasing the efficiency in the estimations, which confirms the country-specific results.

Keywords: D4; E3; E6; H6; PVAR; VAR; fiscal policy; markup

Document Type: Research Article

DOI: https://doi.org/10.1080/00036846.2013.795275

Affiliations: ISEG (School of Economics and Management), Universidade T├ęcnica de Lisboa, Lisboa, Portugal

Publication date: 2013-11-01

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