TY  - JOUR
AU  - Ravn,Morten O.
AU  - Schmitt-Grohe,Stephanie
AU  - Uribe,Martin
TI  - The Macroeconomics of Subsistence Points
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11012
PY  - 2004
Y2  - December 2004
UR  - http://www.nber.org/papers/w11012
L1  - http://www.nber.org/papers/w11012.pdf
N1  - Author contact info:
Morten Ravn
Department of Economics
University College London
London WC1E 6BT
UK
E-Mail: morten.ravn@eui.eu

Stephanie Schmitt-Grohe
Department of Economics
Columbia University
New York, NY 10027
Tel: 212/854-8059
Fax: 212/854-4010
E-Mail: stephanie.schmittgrohe@columbia.edu

Martin Uribe
Department of Economics
Columbia University
International Affairs Building
New York, NY 10027
Tel: 212 851 4008
Fax: 212 854 8059
E-Mail: martin.uribe@columbia.edu
AB  - This paper explores the macroeconomic consequences of preferences displaying  a subsistence point. It departs from the existing related literature by assuming that subsistence points are specific to each variety of goods rather than to the composite consumption good. We show that this simple feature makes the price elasticity of demand for individual goods procyclical. As a result, markups behave countercyclically in equilibrium. This implication is in line with the available empirical evidence.
ER  -