Department of Economics and Business Economics

Estimating the Price Markup in the New Keynesian Model

Research output: Working paperResearch

Standard

Estimating the Price Markup in the New Keynesian Model. / Andreasen, Martin Møller; Dang, Mads Khoa-Dang.

Aarhus : Institut for Økonomi, Aarhus Universitet, 2019.

Research output: Working paperResearch

Harvard

Andreasen, MM & Dang, MK-D 2019 'Estimating the Price Markup in the New Keynesian Model' Institut for Økonomi, Aarhus Universitet, Aarhus.

APA

Andreasen, M. M., & Dang, M. K-D. (2019). Estimating the Price Markup in the New Keynesian Model. Institut for Økonomi, Aarhus Universitet. CREATES Research Papers No. 2019-03

CBE

Andreasen MM, Dang MK-D. 2019. Estimating the Price Markup in the New Keynesian Model. Aarhus: Institut for Økonomi, Aarhus Universitet.

MLA

Andreasen, Martin Møller and Mads Khoa-Dang Dang Estimating the Price Markup in the New Keynesian Model. Aarhus: Institut for Økonomi, Aarhus Universitet. (CREATES Research Papers; Journal number 2019-03). 2019., 22 p.

Vancouver

Andreasen MM, Dang MK-D. Estimating the Price Markup in the New Keynesian Model. Aarhus: Institut for Økonomi, Aarhus Universitet. 2019 Mar 7.

Author

Andreasen, Martin Møller ; Dang, Mads Khoa-Dang. / Estimating the Price Markup in the New Keynesian Model. Aarhus : Institut for Økonomi, Aarhus Universitet, 2019. (CREATES Research Papers; No. 2019-03).

Bibtex

@techreport{ac631ff5b69e47bb8a4d831071338740,
title = "Estimating the Price Markup in the New Keynesian Model",
abstract = "This paper shows that the price demand elasticity can be estimated reliably in a standard log-linearized version of the New Keynesian model when including firm profit as an observable in the estimation. Using this identification strategy for the post-war US economy, we find an estimated price demand elasticity of 2.58 with a tight standard error of 0.31. This corresponds to an average price markup of 63% with a 95% confidence interval of [39%, 88%]. We also show that a calibrated markup of 20%, as commonly used in the literature, is rejected by the data, because it generates too much variability in firm profit.",
keywords = "Aggregate supply curve, Identification, Likelihood inference, New Keynesian model, Price markup",
author = "Andreasen, {Martin M{\o}ller} and Dang, {Mads Khoa-Dang}",
note = "Aggregate supply curve, Identification, Likelihood inference, New Keynesian model, Price markup",
year = "2019",
month = mar,
day = "7",
language = "English",
series = "CREATES Research Papers",
publisher = "Institut for {\O}konomi, Aarhus Universitet",
number = "2019-03",
type = "WorkingPaper",
institution = "Institut for {\O}konomi, Aarhus Universitet",

}

RIS

TY - UNPB

T1 - Estimating the Price Markup in the New Keynesian Model

AU - Andreasen, Martin Møller

AU - Dang, Mads Khoa-Dang

N1 - Aggregate supply curve, Identification, Likelihood inference, New Keynesian model, Price markup

PY - 2019/3/7

Y1 - 2019/3/7

N2 - This paper shows that the price demand elasticity can be estimated reliably in a standard log-linearized version of the New Keynesian model when including firm profit as an observable in the estimation. Using this identification strategy for the post-war US economy, we find an estimated price demand elasticity of 2.58 with a tight standard error of 0.31. This corresponds to an average price markup of 63% with a 95% confidence interval of [39%, 88%]. We also show that a calibrated markup of 20%, as commonly used in the literature, is rejected by the data, because it generates too much variability in firm profit.

AB - This paper shows that the price demand elasticity can be estimated reliably in a standard log-linearized version of the New Keynesian model when including firm profit as an observable in the estimation. Using this identification strategy for the post-war US economy, we find an estimated price demand elasticity of 2.58 with a tight standard error of 0.31. This corresponds to an average price markup of 63% with a 95% confidence interval of [39%, 88%]. We also show that a calibrated markup of 20%, as commonly used in the literature, is rejected by the data, because it generates too much variability in firm profit.

KW - Aggregate supply curve, Identification, Likelihood inference, New Keynesian model, Price markup

M3 - Working paper

T3 - CREATES Research Papers

BT - Estimating the Price Markup in the New Keynesian Model

PB - Institut for Økonomi, Aarhus Universitet

CY - Aarhus

ER -