Margin Rate and the Cycle: The Role of Trade Openness
15 Pages Posted: 22 Feb 2016
Date Written: February 2016
Using three datasets of French manufacturing firms, this paper studies the role of trade openness, in relation with the cycle, as a determinant of company margin rate. Margin rates increase as capacity utilization tightens (and vice versa), reflecting the procyclicality of margin rates. However, high import rates are limiting this procyclicality: when capacities are tight, domestic producers may not be able to serve demand, but foreign producers may substitute for them if they are already present on the market as reflected by the level of import rates.
Keywords: margin rates, capacity utilization, cycle, trade openness
JEL Classification: D24, D43, E32
Suggested Citation: Suggested Citation