Markups and fiscal transmission in a panel of OECD countries

► We study the role of price-marginal cost markups in the transmission of .scal policy shocks. ► Empirical estimates are presented for a bias-corrected panel vector autoregression using OECD data. ► We find that markups decline in response to positive shocks to government spending. ► Further, variable capacity utilization seems to play a key role for .scal transmission.