This paper studies the importance of firm-level price markup dynamics for business cycle fluctuations. Using state-of-the-art IO techniques to measure the behavior of markups over the business cycle at the firm level, I find that markups are countercyclical with an average elasticity of -1.1...

This paper studies the importance of firm-level price markup dynamics for business cycle fluctuations. Using state-of-the-art IO techniques to measure the behavior of markups over the business cycle at the firm level, I find that markups are countercyclical with an average elasticity of -1.1...

We present a model in which net business formation is endogenously procyclical. Variations in the number of operating firms lead to countercyclical variations in markups that give rise to endogenous procyclical movements in measured total factor productivity (TFP). Based on this result, the...

The two sector model presented in this note suggests a simple structural decomposition of movements in the price of investment goods into exogenous and endogenous sources. The endogenous fluctuations arise in the presence of countercyclical markups which vary differently across the consumption...

During the Great Moderation, macroeconomic volatility declined while firm markups increased. We document a causal relationship between volatility and markups due to tacit collusion. We exploit the legalisation of interstate banking as an exogenous decrease in volatility. Using an instrumental...

The cyclical behavior of markups is at the center of macroeconomic debate on the origins of business-cycle fluctuations and policy effectiveness. In theory, markups may fluctuate endogenously with the business cycle due to sluggish price adjustment or to deeper motives affecting the...

Markup cyclicality has been central for debating policy effectiveness and understanding business-cycle fluctuations. However, measuring the cyclicality of markups is as important as understanding the microeconomic mechanisms underlying that cyclicality. The latter requires measurement of...

The cyclical behavior of markups is at the center of macroeconomic debate on the origins of business-cycle fluctuations and policy effectiveness. In theory, markups may fluctuate endogenously with the business cycle due to sluggish price adjustment or to deeper motives affecting the...

We use detailed micro data to document a causal response of local retail price to changes in house prices, with elasticities of 15%-20% across housing booms and busts. Notably, these price responses are largest in zip codes with many homeowners, and non-existent in zip codes with mostly renters....

In this paper, we assess the cyclicality of mark-ups and profit margins within the United Kingdom, at both the aggregate and industry level. We find that the private sector labour share moves countercyclically, suggesting that the aggregate mark-up moves procyclically. This result survives when...