Price and Investment Dynamics: An Empirical Analysis of Plant Level Data

Uppsala University Economics Working Paper No. 2004:7

41 Pages Posted: 13 Aug 2004

See all articles by Magnus Lundin

Magnus Lundin

Uppsala University - Department of Economics

Nils Gottfries

Uppsala University - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute); IZA Institute of Labor Economics

Tomas Lindstrom

The Riksbank

Date Written: June 2004

Abstract

Price and investment equations are estimated using a unique data set for Swedish manufacturing plants. The empirical specification is based on a theoretical model of a financially constrained firm selling its output in a customer market. We find that, as predicted by our theoretical model, prices respond strongly to cost shocks but are not much affected by variations in demand and high predetermined investment is associated with a higher price.

Keywords: Cyclical price adjustment, price rigidity, price equation, countercyclical markup

JEL Classification: D43, L11, L13

Suggested Citation

Lundin, Magnus and Gottfries, Nils and Lindstrom, Tomas, Price and Investment Dynamics: An Empirical Analysis of Plant Level Data (June 2004). Uppsala University Economics Working Paper No. 2004:7, Available at SSRN: https://ssrn.com/abstract=575961 or http://dx.doi.org/10.2139/ssrn.575961

Magnus Lundin

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden

Nils Gottfries (Contact Author)

Uppsala University - Department of Economics ( email )

Box 513
SE-75120 Uppsala
Sweden
+46 18 471 2304 (Phone)
+46 18 471 1478 (Fax)

HOME PAGE: http://www.nek.uu.se/faculty/gottfries/index.html

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Tomas Lindstrom

The Riksbank ( email )

Monetary Policy Department
Brunkebergstorg 11
Stockholm, 103 37
Sweden

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