Dundee Discussion Papers in Economics 191: Non-stationary inflation and the markup: an overview of the research and some implications for policy

TY - UNPB

T1 - Dundee Discussion Papers in Economics 191

T2 - Non-stationary inflation and the markup: an overview of the research and some implications for policy

AU - Russell, Bill

PY - 2006

Y1 - 2006

N2 - This paper reports on research into the negative relationship between inflation and the markup. It is argued that this relationship can be thought of as ‘long-run’ in nature which suggests that inflation has a persistent effect on the markup and, therefore, the real wage. A ‘rule of thumb’ from the estimates indicate that a 10 percentage point increase in inflation (as occurred worldwide in the 1970s) is associated with around a 7 per cent fall in the markup accompanied by a similar increase in the real wage. It is argued that movements of this magnitude in the markup and the real wage will have important implications for a range of economic outcomes such as unemployment, employment and investment.

AB - This paper reports on research into the negative relationship between inflation and the markup. It is argued that this relationship can be thought of as ‘long-run’ in nature which suggests that inflation has a persistent effect on the markup and, therefore, the real wage. A ‘rule of thumb’ from the estimates indicate that a 10 percentage point increase in inflation (as occurred worldwide in the 1970s) is associated with around a 7 per cent fall in the markup accompanied by a similar increase in the real wage. It is argued that movements of this magnitude in the markup and the real wage will have important implications for a range of economic outcomes such as unemployment, employment and investment.

KW - Inflation

KW - Wages

KW - Prices

KW - Markup

KW - Monetary policy

KW - Competition

M3 - Discussion paper

T3 - Dundee Discussion Papers in Economics

BT - Dundee Discussion Papers in Economics 191

PB - University of Dundee

ER -