Profit Dynamics Across the Largest Euro Area Countries and Sectors
46 Pages Posted: 21 Dec 2011
Date Written: December 8, 2011
This paper explores the behavior of profits in the four largest euro area countries (Germany, France, Italy and Spain) and the euro area as a whole, while at the same time considering three main sectors (manufacturing, construction and services) in each economy over the period 1988–2010. The paper presents stylized facts about profit developments and, applying a vector autoregressive modeling framework, discusses the sensitivity of profits to four distinctive structural shocks (a demand shock, an employment shock, a wage and price mark-up shocks). In addition, it provides the shock decomposition of historical developments in profits across countries and sectors.
Keywords: Profits, sectoral determinants, VARs, impulse responses, historical
JEL Classification: C32, E23, E25
Suggested Citation: Suggested Citation