Margin Rate and the Cycle: The Role of Trade Openness

15 Pages Posted: 22 Feb 2016

See all articles by Gilbert Cette

Gilbert Cette

Banque de France

Ahmed Jiddou

Banque de France

Remy Lecat

Banque de France

Date Written: February 2016

Abstract

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

Cette, Gilbert and Jiddou, Ahmed and Lecat, Remy, Margin Rate and the Cycle: The Role of Trade Openness (February 2016). Banque de France Working Paper No. 581, Available at SSRN: https://ssrn.com/abstract=2736296 or http://dx.doi.org/10.2139/ssrn.2736296

Gilbert Cette

Banque de France ( email )

Paris
France

Ahmed Jiddou

Banque de France ( email )

Paris
France

Remy Lecat (Contact Author)

Banque de France ( email )

Paris
France

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