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  4. May 2023
  5. Market Power, Financial Constraints, and Monetary Transmission

Market Power, Financial Constraints, and Monetary Transmission

  • Romain Duval
  • Davide Furceri
  • Raphael Lee
  • Marina M. Tavares
AEA Papers and Proceedings
vol. 113, May 2023
(pp. 99-104)
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Abstract

There is growing evidence that corporate market power is increasing and affecting monetary policy transmission. This paper develops a partial equilibrium model that highlights the role of financial constraints in shaping the role of markups for the response of firms to monetary policy shocks. We find support for such a role using a large cross-country firm-level dataset for 14 advanced economies.

Citation

Duval, Romain, Davide Furceri, Raphael Lee, and Marina M. Tavares. 2023. "Market Power, Financial Constraints, and Monetary Transmission." AEA Papers and Proceedings, 113: 99-104. DOI: 10.1257/pandp.20231005

Additional Materials

JEL Classification

  • D21 Firm Behavior: Theory
  • E43 Interest Rates: Determination, Term Structure, and Effects
  • E52 Monetary Policy
  • G31 Capital Budgeting; Fixed Investment and Inventory Studies; Capacity
  • G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill