Market Power and Fiscal Policy in OECD Countries

Posted: 16 Jul 2013

See all articles by António Afonso

António Afonso

University of Lisbon - ISEG (School of Economics and Management); UECE (Research Unit on Complexity and Economics); ISEG Lisbon School of Economics and Management,Universidade de Lisboa; REM - Research in Economics and Mathematics

Luís F. Costa

ISEG - Lisbon School of Economics & Management of Universidade de Lisboa; REM - Research in Economics and Mathematics; UECE - Research Unit on Complexity and Economics

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Date Written: July 15, 2013

Abstract

We compute average markups as a measure of market power throughout time and study their interaction with fiscal policy and macroeconomic variables in a VAR framework. From impulse-response functions, the results, with annual data for a set of 14 OECD countries, show that the markup (i) depicts a pro-cyclical behaviour with productivity shocks and (ii) a counter-cyclical behaviour with fiscal spending shocks. We also use a PVAR, increasing the efficiency in the estimations, which confirms the country-specific results.

Keywords: fiscal policy, markup, VAR, PVAR

JEL Classification: D4, E3, E6, H6

Suggested Citation

Afonso, António and Costa, Luís Filipe Pereira da, Market Power and Fiscal Policy in OECD Countries (July 15, 2013). Applied Economics, Routledge, Vol. 45, No. 32, 2013, Available at SSRN: https://ssrn.com/abstract=2294164

António Afonso (Contact Author)

University of Lisbon - ISEG (School of Economics and Management) ( email )

R. Miguel Lupi, 20
Lisbon, 1248-078
Portugal
+351 21 392 5985 (Phone)
+351 21 396 6407 (Fax)

HOME PAGE: http://www.iseg.ulisboa.pt/aquila/homepage/aafonso/research

UECE (Research Unit on Complexity and Economics) ( email )

Rua Miguel Lupi 20
Lisbon, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://uece.rc.iseg.ulisboa.pt/

ISEG Lisbon School of Economics and Management,Universidade de Lisboa ( email )

Rua do Quelhas 6
LISBOA, 1200-781
Portugal

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://rem.rc.iseg.ulisboa.pt/

Luís Filipe Pereira da Costa

ISEG - Lisbon School of Economics & Management of Universidade de Lisboa ( email )

Rua do Quelhas, 6
Lisboa, 1200-781
Portugal
+351 213 925 981 (Phone)
+351 213 922 808 (Fax)

HOME PAGE: http://https://www.iseg.ulisboa.pt/faculty/luis-costa/

REM - Research in Economics and Mathematics ( email )

ISEG, Universidade de Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal

HOME PAGE: http://https://www.iseg.ulisboa.pt/faculty/luis-costa/

UECE - Research Unit on Complexity and Economics

ISEG, U. Lisboa
Rua Miguel Lupi, 20
Lisboa, 1249-078
Portugal
+351-213 925 912 (Phone)
+351-213 971 196 (Fax)

HOME PAGE: http://https://uece.rc.iseg.ulisboa.pt/

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