Markups and Financial Shocks

Bibliographic Data

ID9712436
AuthorsPhilipp Meinen (Deutsche Bundesbank, corresponding author), Ana Cristina Soares (Banco de Portugal), Ana Cristina Fermino Soares (0000-0002-4014-1794, Banco de Portugal)
Year2022
Volume132
Issue647
Pages2471-2499
Publication date2022-09-19
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (PUBLISHER • GB)
DOI10.1093/ej/ueac025
OpenAlexW4225695266
LanguageEN
Citations received2
References cited61

This paper analyses the impact of financial frictions on markup adjustments at the firm level. We use a rich panel data set that matches information on banking relationships with firm-level data. By relying on insights from recent contributions in the literature, we obtain exogenous credit supply shifters and markups that are both firm specific and time varying. We uncover new findings at this level. In particular, firms more exposed to liquidity risks tend to raise markups in response to negative bank-loan supply shocks, while less exposed firms generally reduce them. Further empirical analyses suggest that our findings are mostly consistent with models featuring a sticky customer base, where financially constrained firms have an incentive to raise markups in order to sustain liquidity without losing too many customers. Our results have important economic implications regarding the cyclicality of the aggregate markup

Business · Customer base · Econometrics · Economics · Incentive · Loan · Market liquidity · Markup language · Microeconomics · Monetary economics · Order (exchange · Panel data · Banking stability, regulation, efficiency · Corporate Finance and Governance · Economic theories and models · Finance

Tools

Open DOI