The Cyclical Behavior of Price Elasticity of Demand

New products and market competition

“…On the other hand, and consistent with Domovitz et al [1986], PCMs are positively related with fluctuations in market demand (they are procyclical), and this relation is statistically significant. However, there is no relation between PCMs and fluctuations in aggregate demand, Finally, an appreciation of the U.S. industry-specific real exchange rate (EIMLt) causes a drop in PCMs, consistent with Field and Pagoulatos [1997]. Note: * and ** indicate 0.01 and 0.05 significance levels, respectively.…”

“…On the other hand, the growth rate of the tog of capacity utilization (ACUt) and the growth rate of the index of industrial production (AIPMt) for manufacturing, along with a few monthly lags, are used to proxy aggregate demand and the business cycle. Finally, to control for import penetration and its impact on the intensity of market competition (see Salinger [1990] and Field and Pagoulatos [1997]), the author constructs, as in Campa and Goldberg [1998], an industry-specific real trade-weighted exchange rate, adjusted by the share of real imports in real domestic sales of the industries in the sample (EIMi,t).…”

“…Source: The Board of Governors of the Federal Reserve System. Footnotes 1See Salinger [1990] and Field and Pagoulatos [1997]. 2See Krippendorff [1980].…”

“…Domowitz, Hubbard, and Petersen [1988] emphasize industry concentration, while Field and Pagoulatos [1997] identify product differentiation, capital intensity, and import penetration as factors influencing market competition and PCMs.…”

Strategic business cycle management and organizational performance: a great unexplored research stream

“…Divest during expansionary times when it is high Accounts receivable Churchill and Lewis (1984) Tighten credit/aggressively collect and credit Isberg (2004) accounts receivable in management Navarro (2005) anticipation of a recession. Loosen credit standards in anticipation of an expansion Harrod (1936) Procyclically cut prices during Field and Pagoulatos (1997) recessions and raise prices Navarro (2006) during expansions as short-run demand price elasticities rise and fall…”