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Markups and inflation in oligopolistic markets : evidence from wholesale price data / by Patrick Alexander, Lu Han, Oleksiy Kryvtsov and Ben Tomlin

Author
Alexander, Patrick D.
Published
[Ottawa] : Bank of Canada = Banque du Canada, 2024.
Copyright Date
©2024
Edition
[Cat. No.: FB3-5/2024-20E-PDF].
Physical Description
1 online resource (ii, 80, that is, ii, 79 pages) : illustrations (chiefly colour).
Additional Creators
Bank of Canada
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Language Note
Includes abstracts in English and French.
Restrictions on Access
Free-to-read Unrestricted online access
Summary
"We study how the interaction of market power and nominal price rigidity influences inflation dynamics. We formulate a tractable model of oligopolistic competition and sticky prices and derive closed-form expressions for the pass-through of idiosyncratic and common cost shocks to firms' prices. Using unpublished micro data for Canadian wholesale firms, we estimate that the pass-through of idiosyncratic costs is incomplete at 70% and independent of the degree of sector-price-stickiness. The pass-through of common costs declines with price stickiness, from nearly complete in flexible-price sectors to below 70% in sectors with the stickiest prices. An increase in the degree of sector or firm market power reduces the pass-through of both types of cost shocks. These estimates imply a degree of strategic complementarity that lowers the slope of the New Keynesian Phillips curve by 30% in a one-sector model and by 74% in a multi-sector model"--Abstract, page ii.
Report Numbers
FB3-5/2024-20E-PDF
Subject(s)
Note
Distributed by the Government of Canada Publishing and Depository Services Program (Weekly acquisitions list 2024-35).
"Last updated: May 28, 2024."
ISSN assigned to different series.
Bibliography Note
Includes bibliographical references (pages 35-38).
View MARC record | catkey: 46454445