Introduction

We study the relationship between monopoly power and aggregate fluctuations by responding three research questions:

1. How do markups react to demand and productivity shocks? We explore microeconomic databases where price and quantity information are used to identify both productivity and demand shocks. We also study the mismeasurement problem of using the labour share as a proxy for markups.

2. How are firms' pricing and markup decisions influenced by their financial strength? We use the results produced by the response to (1) and the financial information available. We test existing theories for markup fluctuations based upon corporate-finance explanations.

3. Can counter-cyclical markups induce singular dynamics at the macroeconomic level? We use recent methods from applied mathematics in a standard dynamic general equilibrium model with an endogenous markup generated by Cournot competition and entry. Finally, our results can be used for policy be it fiscal, monetary or regulatory.

Financial support by FCT - Portuguese National Funding Agency for Science, Research and Technology is gratefully acknowledged. Research grant PTDC/EGE-ECO/28814/2017.

Participating Institutions

• REM - Research on Economics and Mathematics; UECE - Research Unit on Complexity and Economics.

• Nova School of Business and Economics.

Researchers

• Paulo Brito (co-PI) - ISEG, ULisboa; REM - UECE.

• Luís F. Costa (PI) - ISEG, ULisboa; REM - UECE.

• João Costa Filho - Nova SBE; FAAP.

• Cláudia Custódio - Imperial College London.

• Huw Dixon - Cardiff Business School, Cardiff University.

• Carlos Santos - ISEG, ULisboa; REM - UECE.

Papers

• Santos, C.; Costa, L. & Brito, P. (2022). Demand, Supply and Markup Fluctuations. Economic Journal 132(644), 1620–1645. https://doi.org/10.1093/ej/ueab090. Video abstract Pre-print

• Brito, P.; Costa, L.; Custódio, C. & Santos, C. (2023). Heterogeneous Responses to Business Cycle Fluctuations: The effects of financial strength on sales and markup. Presented at conferences.

• Brito, P.; Costa, L. & Dixon, H. (2023). To Infinity and Beyond: Singular macroeconomic dynamics and temporary (in)determinacy. Presented at conferences.

• Brito, P.; Costa, L.; Costa Filho, J. & Santos, C. (2023). The square root of all evil: The role of market power in fiscal consolidations. Presented at conferences.

Graduate Supervision

PhD Students

• Fortes L. Rodrigues, E. (2023). Uncertainty, Corruption, Trust in Government and the Effectiveness of Government Spending. PhD in Economics, ISEG - ULisboa. Supervisors: Luís F. Costa & Sandra Gomes (Banco de Portugal; ISEG - ULisboa). https://www.repository.utl.pt/handle/10400.5/22353. 

• Faustino, R. (2020). Essays in Macroeconomics. PhD in Economics, ISEG - ULisboa. Supervisor: Luís F. Costa. https://www.repository.utl.pt/handle/10400.5/20576. 

MSc Students

• Krause, W. (2023). The Covid-19 Recession in Germany: A Macro-epidemiological Analysis. MSc in Monetary and Financial Economics, ISEG - ULisboa. Supervisors: Luís F. Costa & João Costa Filho. https://www.repository.utl.pt/handle/10400.5/27354. 

• Santos, R. (2022). Capital dispersion and productivity in Portugal during the Troika period. MSc in Economics, ISEG - ULisboa. Supervisor: Luís F. Costa. https://www.repository.utl.pt/handle/10400.5/25862. 

• Abreu, F. (2018). What Has Been Driving the Fluctuations in the Portuguese Economy? A business-cycle accounting approach. MSc in Economics, ISEG - ULisboa. Supervisors: Luís F. Costa & Pedro Brinca (Nova SBE). https://www.repository.utl.pt/handle/10400.5/16571. 

Dissemination

Video Abstracts

• Santos, Costa & Brito.

Conferences

• 2022-07-08 - 15th Annual Meeting of the Portuguese Economic Journal, University of Azores - Brito, Costa, Costa Filho & Santos, and Brito, Costa, Custódio & Santos.

• 2021-07-03 - 14th Annual Meeting of the Portuguese Economic Journal, University of Azores - Brito, Costa, Costa Filho & Santos. 

• 2021-07-30 - 9th UECE Conference on Economic and Financial Adjustments, ISEG - Lisbon School of Economics & Management - Brito, Costa, Costa Filho & Santos.

• 2019-09-13 - 7th UECE Conference on Economic and Financial Adjustments, ISEG - Lisbon School of Economics & Management - Brito, Costa & Dixon.

• 2019-07-19 - 13th Annual Meeting of the Portuguese Economic Journal, University of Évora - Brito, Costa & Dixon.

Seminars and Workshops

• 2021-11-23 - Seminat at FEP - School of Economics and Management, University of Porto - Santos, Costa & Brito.

• 2021-03-18 - IBMEC/SP Seminar - Brito, Costa, Costa Filho & Santos.

• 2021-03-04 - Lisbon Macro Club Workshop - Brito, Costa, Costa Filho & Santos.