Is there a stable relationship between capacity utilization and inflation?
Many policymakers and financial market participants use the Federal Reserve's industrial capacity utilization rate as an indicator of future changes in inflation. During the past few years, however, the usefulness of the utilization rate as an inflation indicator has come under scrutiny. ; In this article, Kenneth Emery and Chih-Ping Chang examine capacity utilization's power to predict changes in inflation, with a focus on whether the relationship is stable over time. They find that while there was a positive forecasting relationship between capacity utilization and changes in consumer price inflation before 1983, this relationship has substantially weakened since the end of 1982. In fact, after 1982 there is no evidence that high capacity utilization rates predict increases in consumer price inflation. Although the results are similar for changes in producer price inflation, the deterioration in the relationship is not as severe. So there is still some evidence that, after 1982, capacity utilization helps to predict changes in producer price inflation.
Volume (Year): (1997)
Issue (Month): Q I ()
|Contact details of provider:|| Web page: http://www.dallasfed.org/|
More information through EDIRC
|Order Information:|| Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Stephen G. Cecchetti, 1995.
"Inflation Indicators and Inflation Policy,"
in: NBER Macroeconomics Annual 1995, Volume 10, pages 189-236
National Bureau of Economic Research, Inc.
- Wolfgang Franz & Robert J. Gordon, 1993.
"German and American Wage and Price Dynamics: Differences and Common Thenes,"
NBER Working Papers
4292, National Bureau of Economic Research, Inc.
- Franz, Wolfgang & Gordon, Robert J., 1993. "German and American wage and price dynamics : Differences and common themes," European Economic Review, Elsevier, vol. 37(4), pages 719-754, May.
- Franz, Wolfgang & Gordon, Robert J, 1993. "German and American Wage and Price Dynamics: Differences and Common Themes," CEPR Discussion Papers 777, C.E.P.R. Discussion Papers.
- repec:fip:feddse:y:1994:i:aug:p:1-4 is not listed on IDEAS
- Duca, John V., 1996.
"Inflation, unemployment, and duration,"
Elsevier, vol. 52(3), pages 293-298, September.
- Mary G. Finn, 1995. "Is "high" capacity utilization inflationary?," Economic Quarterly, Federal Reserve Bank of Richmond, issue Win, pages 1-16.
- Evan F. Koenig & Mark A. Wynne, 1994. "Is there an output-inflation trade-off?," Southwest Economy, Federal Reserve Bank of Dallas, issue Aug, pages 1-4.
- Nathan S. Balke & Kenneth M. Emery, 1994. "Understanding the price puzzle," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 15-26.
- Jeffrey C. Fuhrer, 1995. "The Phillips curve is alive and well," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 41-56.
When requesting a correction, please mention this item's handle: RePEc:fip:fedder:y:1997:i:qi:p:14-20. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez)The email address of this maintainer does not seem to be valid anymore. Please ask Delia Rodriguez to update the entry or send us the correct address
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.