An I(2) analysis of inflation and the markup is undertaken for the G7 economies and Australia. We find that the levels of prices and costs are best described as I(2) processes and that, except for Japan, a linear combination of the log levels of prices and costs cointegrate to the markup that is integrated of order 1. It is also shown that the markup in each case co-integrates with inflation and that higher inflation is associated with a lower markup in the long run.

Issue Section:
Notes
This content is only available as a PDF.
© 2001 President and Fellows of Harvard College and the Massachusetts Institute of Technology
2001
You do not currently have access to this content.