Credit Expansion and Markups

RePEc Short ID: pch650
ORCID iD: 0000-0002-6820-1197

Chien, YiLi; Lee, Hyungsuk; Lee, Junsang

doi:10.20955/r.104.297-316

Journal Article

Credit Expansion and Markups

Abstract: This article documents new empirical facts about the effects of credit expansion on the aggregate markup and markup dispersion in the United States. We use U.S. macroeconomic data and Jordà's local projection and single-equation estimation methods. The results for both methods show that the aggregate markup and markup dispersion increase in response to both a firm debt shock and a household debt shock. The previous literature mostly focused on the effect of firm debt financing on firm markups. Extending previous research, our study shows that household credit expansion also plays a role in firm markups. This finding calls for further theoretical and analytical studies to understand the underlying mechanism regarding the effect of household credit expansion on firm markups.

Keywords: credit expansion; aggregate markup; markup dispersion;

JEL Classification: E31; E51; L11;

https://doi.org/10.20955/r.104.297-316