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A reexamination of the relationship between capacity utilization and inflation

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  • Paul W. Bauer

Abstract

A review of the theoretical and empirical relationship between capacity utilization and inflation, employing a two-equation structural model that does not suffer from simultaneity bias and that appears to be stable over time.

Suggested Citation

  • Paul W. Bauer, 1990. "A reexamination of the relationship between capacity utilization and inflation," Economic Review, Federal Reserve Bank of Cleveland, vol. 26(Q III), pages 2-12.
    • Handle: RePEc:fip:fedcer:y:1990:i:qiii:p:2-12:n:v.26no.3
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    References listed on IDEAS

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    1. Lawrence R. Klein & Virginia Long, 1973. "Capacity Utilization: Concept, Measurement, and Recent Estimates," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 743-764.
    2. Guilkey, David K & Salemi, Michael K, 1982. "Small Sample Properties of Three Tests for Granger-Causal Ordering in a Bivariate Stochastic System," The Review of Economics and Statistics, MIT Press, vol. 64(4), pages 668-680, November.
    3. Paul W. Bauer & Mary E. Deily, 1988. "Measuring the unseen: a primer on capacity utilization," Economic Commentary, Federal Reserve Bank of Cleveland, issue Jun.
    4. Thomas A. Gittings, 1989. "Capacity utilization and inflation," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 13(May), pages 2-9.
    5. Robert H. Rasche & John A. Tatom, 1977. "The effects of the new energy regime on economic capacity, production, and prices," Review, Federal Reserve Bank of St. Louis, vol. 59(May), pages 2-12.
    6. Matthew D. Shapiro, 1989. "Assessing the Federal Reserve's Measures of Capacity and Utilization," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 20(1), pages 181-242.
    7. Dallas S. Batten & Daniel L. Thornton, 1984. "Lag length selection and Granger causality," Working Papers 1984-001, Federal Reserve Bank of St. Louis.
    8. Roger K. Conway & P. A. V. B. Swamy & John F. Yanagida, 1983. "The impossibility of causality testing," Special Studies Papers 178, Board of Governors of the Federal Reserve System (U.S.).
    9. John P. Judd & Bharat Trehan, 1989. "Unemployment-rate dynamics: aggregate-demand and -supply interactions," Economic Review, Federal Reserve Bank of San Francisco, issue Fall, pages 20-37.
    10. Tatom, John A., 1979. "The meaning and measurement of potential output : A comment on the Perloff and Wachter results," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 10(1), pages 165-178, January.
    11. Scadding, John L, 1973. "The Sampling Distribution of the Liviatan Estimator of the Geometric Distributed Lag Parameter," Econometrica, Econometric Society, vol. 41(3), pages 503-508, May.
    12. Haynes, Stephen E & Stone, Joe A, 1985. "A Neglected Method of Separating Demand and Supply in Time Series Regression," Journal of Business & Economic Statistics, American Statistical Association, vol. 3(3), pages 238-243, June.
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    Cited by:

    1. Carol Corrado & Joe Mattey, 1997. "Capacity Utilization," Journal of Economic Perspectives, American Economic Association, vol. 11(1), pages 151-167, Winter.
    2. Renata Grzeda Latocha & Gernot Nerb, 2004. "Modelling Short-term Interest Rates in the Euro Area Using Business Survey Data," Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2004(1), pages 43-69.
    3. Pejman Bahramian & Andisheh Saliminezhad, 2021. "Does Capacity Utilization Predict Inflation? A Wavelet Based Evidence from United States," Computational Economics, Springer;Society for Computational Economics, vol. 58(4), pages 1103-1125, December.
    4. repec:ebl:ecbull:v:5:y:2007:i:4:p:1-12 is not listed on IDEAS
    5. Lefteris Tsoulfidis & Theologos Dergiades, 2007. "Estimating Capacity Utilization Using a SVAR Model: An Application to the US and Canadian Economies," Economics Bulletin, AccessEcon, vol. 5(4), pages 1-12.
    6. Niek Nahuis, 2003. "An alternative demand indicator: the 'non-accelerating inflation rate of capacity utilization'," Applied Economics, Taylor & Francis Journals, vol. 35(11), pages 1339-1344.
    7. Richard De Abreu Lourenco & Philip Lowe, 1994. "Demand Shocks, Inflation and the Business Cycle," RBA Research Discussion Papers rdp9411, Reserve Bank of Australia.
    8. Evan F. Koenig, 1994. "Capacity utilization and the evolution of manufacturing output: a closer look at the \"bounce-back effect.\"," Working Papers 9402, Federal Reserve Bank of Dallas.

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