Presenter: Mathias Klein (Riksbank)
Co-authors: Edvin Ahlander, Evi Pappa
Title: What Flattens the Supply Curve?
Abstract: We compile a unique dataset with over 20 years of monthly price and real output data for Swedish industrial firms and use it to estimate the short and medium-run responses of prices and quantities to exogenous demand shocks. A 1 percent increase in output due to demand shocks raises prices by 0.35% within a year. The supply curve‘s elasticity varies with economic conditions and firm characteristics. It flattens with financial uncertainty and steepens during inflationary periods. Higher supply elasticities are found in firms with low competition, labor costs, and sales volatility.