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The NIRCU and the Phillips curve: an approach based on micro data

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  • Eva M. Köberl
  • Sarah M. Lein

Abstract

In this paper we propose a straightforward method to derive a non-inflationary rate of capacity utilization (NIRCU) based on micro data. We condition the current capacity utilization of firms on their current and planned price adjustments. The non-inflationary capacity utilization rate is then defined as the rate where a firm feels no price adjustment pressure. One of the main advantages is that this methodology uses structural aspects and does not make it necessary to operate with - often rather arbitrary - statistical filters. We show that our aggregate NIRCU performs remarkably well as an indicator of inflationary pressure in a Phillips curve estimation.

Suggested Citation

  • Eva M. Köberl & Sarah M. Lein, 2011. "The NIRCU and the Phillips curve: an approach based on micro data," Canadian Journal of Economics, Canadian Economics Association, vol. 44(2), pages 673-694, May.
  • Handle: RePEc:cje:issued:v:44:y:2011:i:2:p:673-694
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    1. Julio J. Rotemberg & Michael Woodford, 1998. "An Optimization-Based Econometric Framework for the Evaluation of Monetary Policy: Expanded Version," NBER Technical Working Papers 0233, National Bureau of Economic Research, Inc.
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    1. repec:eee:ecmode:v:64:y:2017:i:c:p:153-171 is not listed on IDEAS
    2. Crosilla, Luciana & Leproux, Solange & Malgarini, Marco, 2014. "The impact of the crisis on italian industrial capacity: an assessment based on the istat manufacturing survey," MPRA Paper 67531, University Library of Munich, Germany.
    3. Bryan, Michael F. & Meyer, Brent & Parker, Nicholas B., 2014. "The inflation expectations of firms: what do they look like, are they accurate, and do they matter?," FRB Atlanta Working Paper 2014-27, Federal Reserve Bank of Atlanta, revised 01 Jan 2015.
    4. Alex Contreras M. & Pablo Del Aguila R. & Fernando Alonso Regalado S. & F. Martín Martinez P., 2017. "Brecha de la capacidad de utilización como medida alternativa de la brecha producto: Un enfoque para Perú basado en micro datos," Working Papers 2017-94, Peruvian Economic Association.
    5. Pirmin Fessler & Fabio Rumler & Gerhard Schwarz, 2014. "A micro-based non-inflationary rate of capacity utilisation as a measure of inflationary pressure: evidence for Austria," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 41(1), pages 23-36, February.

    More about this item

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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