The Korean Journal of Economic Studies
Measuring Markup Dispersion in South Korea and the Implication for Monetary Policy
Yungu Cho (Bank of Korea), Bokyung Kim (Bank of Korea) and Hyuntae Kim (Bank of Korea)Year 2022Vol. 70No. 3
This study cross-verified whether the gap in markup between leading firm and following firm has continued to widen since mid-2000s using various datasets. We also presented empirical evidence that the heterogeneity of the effect of monetary policy on firm’s investment decisions can be exacerbated by the increase in the dispersion of firm’s market power. The results are as follows. First, the markup dispersion of firms in South Korea has been continuously widened since mid-2000s. By industry, the widening of the gap was noticeable in the non-manufacturing sector, and the manufacturing sector remained relatively stable. Second, this gap in market power was found to be related to the heterogeneity of the effect of monetary policy among firms. This result suggests the possibility that the heterogeneity of monetary policy effects on firms has been further expanded due to the continuously widening gap in markup among firms.