| Abstract [eng] |
The main purpose of this work is to reveal the relationship between inflation and profits of Lith-uanian companies. In order to estimate the relationship between inflation and profits, it was decided to use short-term and long-term relationship research methods. For short-term relationships, OLS methods were applied, evaluating four main models. These models assessed the impact of inflation on real net profit and markup margin changes and vice versa. Additionally, these relationships were ana-lysed across various economic activities to discern sector-specific effects. Meanwhile, long-run relationships were planned to be measured by using Engle-Granger and Johansen procedures for cointegration testing. Key findings in the short-term analysis include: • Neither real net profit nor markup margin changes significantly influence inflation change. When categorizing companies by economic activity, only the markup margin change in sector related to electricity, gas, steam supply, and air conditioning was signifi-cant in explaining inflation changes. A 1 p.p. increase in the change of markup margin in this sector corresponded to a 0.41 p.p. decrease in inflation change. • Regarding real net profit, inflation change was a significant explanatory variable. If the change in inflation had increased by 1 p.p. in the pre-vious period, then in this period the real net profit would tend to decrease by 11.90 p.p. Differentiating by economic activity types, this relationship was particularly notable in: 1) wholesale, retail, motor vehicle, motorcycle repair; 2) transportation and storage sectors. Here, a 1 p.p. increase in change in inflation in the previous period would reduce real net profit by 13.62 p.p. and 15.29 p.p., respectively, in these sectors. • Further, the study found that inflation change does not significantly impact markup mar-gin changes in general. However, in specific sectors like water supply, sewage treatment, waste management and real estate operations, inflation changes do influence markup margin changes. If inflation increased by 1 p.p. in current period, then in the same period the change in markup margin, calculated for water supply, wastewater treatment, waste management and regeneration companies, would tend to decrease by 0.33 p. p., while if the change in inflation has increase by 1 p.p. a year ago, the in this period the change in markup margin calculated for companies engaged in real estate operations would tend to decrease by 1.01 p.p. When assessing the long-term relationship between companies' real net profit and inflation, the conclusions were reached that the long-term relationship, both in the general case and after separating companies by type of economic activity, does not exist, because the indicator of real net profit (both in the general case and after separating companies by type of economic activity) is stationary in its original form (i.e., not integrated). Similarly, no long-term relationship exists between inflation and the change in mark-ups, because in all cases the Granger causality test showed that these variables are not mutually related. In conclusion, while the study provides insights into the relationship between inflation and com-pany profits in Lithuania, the results should be interpreted with caution due to the limited obser-vation period. Future research with more frequent observations or extended timeframes could potentially yield different outcomes. |
