Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/152887
Authors: 
Przybyla, Marcin
Roma, Moreno
Year of Publication: 
2005
Series/Report no.: 
ECB Working Paper 453
Abstract: 
In this paper we explore the link between the intensity of product market competition and inflation rates across EU countries and sectors. We consider long-term averages of inflation rates in order to remove the cyclical behavior of inflation over time and as alternative proxies of competition we use the level of mark-up, profit margin, the profit rate and a survey based “intensity of competition” variable. Results for both aggregate and sectoral panels show that the extent of product market competition, as proxied by the level of mark-up in particular, is an important driver of inflation. Notwithstanding some caveats associated with the measurement of the proxies of competition used, our findings suggest that higher product market competition reduces average inflation rates for a prolonged period of time. Moreover, results both at the aggregate and sectoral level are generally confirmed by a wide set of robustness tests.
Subjects: 
competition
Estimation and Panel Data Analysis
inflation
JEL: 
C21
C23
E31
Document Type: 
Working Paper

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