Counter-cyclical markups

One of the things that gets discussed in the currently-under-attack topic of DSGE models is that of counter-cyclical markups.  If the typical firm’s markup is counter-cyclical — that is, if it’s markup over marginal cost rises during a recession and falls during a boom — then both the magnitude and the duration of any given shock to the economy will be larger.

From the front page of the FT website this afternoon:

counter-cyclical profits

The article it’s referring to is here.

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