Wednesday, October 13, 2010: 11:15 AM
Our aim is to investigate the determinants of mark up in the Brazilian industrial firms in the 1990s, a period stamped by slow economic dynamism and relevant changes in the macroeconomic environment. We present a comprehensive overview of the post-Keynesian theory of price determination, discussing that price changes depend on mark-up decision, and performed an econometrics analysis with yearly panel data. We estimated several competitive models: FGLS for the data in static levels, dynamic and fully modified OLS – assuming non-stationarity and cointegration –, and dynamic panel data models using GMM estimators. The results indicated the static model performed better than the others. The econometric exercise showed how microeconomic and macroeconomic variables affected the determination of the mark up. A negative relation was found between demand and mark up changes, pointing out that it evolved in an anti-cyclic way. This behavior is explained based on the increase in uncertainty that surrounded changes in the macroeconomic scenario in the 1990s. Besides that, the empirical model presented the existence of a relation between exchange rate over-valuation and the level of mark-ups. The attempt to integrate post-Keynesian theory of price determination and an econometric exercise using panel models is probably the most interesting and significant contribution of the article.