The relationship between the markup and inflation in the G7 economies and Australia

Anindya Banerjee, Bill Russell

    Research output: Contribution to journalArticlepeer-review

    Abstract

    An I(2) analysis of inflation and the markup is undertaken for the G7 economies and Australia. We find that the levels of prices and costs are best described as I(2) processes and that except for Japan a linear combination of the log levels of prices and costs cointegrate to the markup that is integrated of order 1. It is also shown that the markup in each case co-integrates with inflation and that higher inflation is associated with a lower markup in the long run.
    Original languageEnglish
    Pages (from-to)377
    Number of pages384
    JournalReview of Economics and Statistics
    Volume83
    Issue number2
    DOIs
    Publication statusPublished - 2001

    Keywords

    • Inflation
    • Wages
    • Prices
    • Markup
    • I(2)
    • Polynomial cointegration

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