Template-type: ReDIF-Paper 1.0
Author-Name: Christopher Bowdler
Author-Email: christopher.bowdler@nuffield.ox.ac.uk
Author-Workplace-Name: Nuffield College, Oxford University, UK
Author-Name: Eilev S. Jansen
Author-Workplace-Name: Norges Bank and Norwegian University of Science and Technology
Title: Testing for a time-varying price-cost markup in the Euro area inflation process
Abstract: Empirical models of inflation often incorporate equilibrium correction 
effects based upon levels of prices and input costs. Such models assume that the 
steady-state price-cost markup is constant, but recent research suggests that this
may not be true for the Euro area economy, which has undergone major structural 
reforms over the last 25 years. We allow for permanent shifts in the markup 
factor through estimating an inflation equation that includes a time-varying intercept.
The model suggests that a reduction in the markup contributed to disinflation in the 
Euro area during the period 1981-2000.
Classification-JEL:C22, C32, E31.
Keywords:Inflation, price-cost markup, cointegration, time-varying intercept, dynamic modelling.
Length:18 pages
Creation-Date:2004-04-30
Number:2004-W10
File-URL: http://www.nuff.ox.ac.uk/economics/papers/2004/w10/markupinflation30april04.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0410