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

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    Abstract

    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.
    Original languageEnglish
    PublisherUniversity of Dundee
    Publication statusPublished - 2006

    Publication series

    NameDundee Discussion Papers in Economics
    PublisherUniversity of Dundee
    No.191
    ISSN (Print)1473-236X

    Keywords

    • Inflation
    • Wages
    • Prices
    • Markup
    • Monetary policy
    • Competition

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    Russell, B. (2006). Non-stationary inflation and the markup: an overview of the research and some implications for policy. (Dundee Discussion Papers in Economics; No. 191). University of Dundee.