This would render the phenomenon of subdued inflation in the face of a tighter US labour market all the more puzzling. On the other hand, the Bundesbank study I just mentioned finds evidence of a procyclical behaviour of mark-ups in European countries. Especially during the crisis years, the weakness of aggregate demand appears to have compressed profit margins.
Duvvuri Subbarao: Achieving inclusive growth – the challenge of a new era Welcome remarks by Dr Duvvuri Subbarao, Governor of the Reserve Bank of India, at the 13th L.K. Jha Memorial Lecture, Mumbai, 27 September 2012.