Investigating the behaviour of the mark-up of price over marginal cost under different business cycle situation: Empirical study in Malaysia manufacturing industry

• Published in: Australian Journal of Basic and Applied Sciences
• Main Author: Nawi A.S.; Rahman N.N.A.; Daud N.M.
• Format: Article
• Language: English
• Published: 2011
• Online Access: https://www.scopus.com/inward/record.uri?eid=2-s2.0-80053274954&partnerID=40&md5=46bd2c8dab97124f5e8aab53851193cc

This paper investigates the behaviour of the mark-up of price over marginal cost under different business cycle situations. It analyses how the interaction between firms' entry and exit, and the business cycle affects the variations in the degree and cyclicality of the mark-up. In this paper, mark-ups are estimated for Malaysian manufacturing industry using a Nominal Solow Residual (NSR) Roeger (1995) type model. It is interesting to examine the extent to which the mark-up varies across the industries within a sector. However, it is also helpful to pool the data across all manufacturing industries to gain further insights into the reason for variations in the mark-up in the whole sample.