Posts categorized under Business Fluctuations

Boom, slump, sudden stops, recovery, and policy options: Portugal and the Euro

June 29, 2017
Over the past 20 years, Portugal has gone through a boom, a slump, a sudden stop, and now a timid recovery. Unemployment has decreased, but remains high, and output is still far below potential. Competitiveness has improved, but more is needed to keep the current account in check as the economy recovers. Private and public debt are high, both legacies of the boom, the slump and the sudden stop. Productivity growth remains low.

Demand, supply and markup fluctuations

October 24, 2016
Does monopoly power (i.e. markups) increase or decrease in recessions? If market power increases in recessions, production becomes more inefficient aggravating the recession. However, if market power decreases, competition works as a self-correcting mechanism in the economy increasing overall efficiency. For this reason, understanding how markups fluctuate has been so central in the debate about macroeconomic policy effectiveness. This debate is far from being solved. Its answer is empirical. However, there are two empirical challenges to determining the type of cyclical behavior of markups: (i) separating supply (productivity) shocks from demand shocks and (ii) properly measuring the markups.