DP15360 Bottom-up Markup Fluctuations

Author(s):	Ariel Tomas Burstein, Vasco M Carvalho, Basile Grassi
Publication Date:	October 2020
Keyword(s):	Aggregate fluctuations, Firm Dynamics, granularity, Markup Cyclicality, Oligopolistic Competition
JEL(s):	D21, D22, D24, D43, E32, L11, L13
Programme Areas:	Industrial Organization, Monetary Economics and Fluctuations
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=15360

We study markup cyclicality in a granular macroeconomic model with oligopolistic competition. We characterize the comovement of firm, sectoral, and economy-wide markups with sectoral and aggregate output following firm-level shocks. We then quantify the model's ability to reproduce salient features of the cyclical properties of markups in French administrative firm-level data, from the bottom (firm) level to the aggregate level. Our model helps rationalize various, seemingly conflicting, measures of markup cyclicality in the French data.