Cost-Price Relationships in a Concentrated Economy

9 Pages Posted: 24 May 2022

See all articles by Falk Bräuning

Falk Bräuning

Federal Reserve Banks - Federal Reserve Bank of Boston

Jose L. Fillat

Federal Reserve Banks - Federal Reserve Bank of Boston

Gustavo Joaquim

Federal Reserve Bank of Boston

Multiple version iconThere are 3 versions of this paper

Date Written: May, 2022

Abstract

The US economy is at least 50 percent more concentrated today than it was in 2005. In this paper, we estimate the effect of this increase on the pass-through of cost shocks into prices. Our estimates imply that the pass-through becomes about 25 percentage points greater when there is an increase in concentration similar to the one observed since the beginning of this century. The resulting above-trend price growth lasts for about four quarters. Our findings suggest that the increase in industry concentration over the past two decades could be amplifying the inflationary pressure from current supply-chain disruptions and a tight labor market.

Keywords: inflation, supply shock identification, cost-price pass-through, industry concentration

JEL Classification: E30, E31, L11, L16

Suggested Citation

Bräuning, Falk and Fillat, Jose L. and Joaquim, Gustavo, Cost-Price Relationships in a Concentrated Economy (May, 2022). Federal Reserve Bank of Boston Research Paper Series Current Policy Perspectives Paper No. 94265, Available at SSRN: https://ssrn.com/abstract=4118181

Falk Bräuning (Contact Author)

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

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Boston, MA 02210
United States

Jose L. Fillat

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States
617-973-3342 (Phone)
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HOME PAGE: http://www.bos.frb.org/economic/econbios/fillat.htm

Gustavo Joaquim

Federal Reserve Bank of Boston ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

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