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A micro-based non-inflationary rate of capacity utilisation as a measure of inflationary pressure: evidence for Austria

Author

Listed:
  • Pirmin Fessler

  • Fabio Rumler

  • Gerhard Schwarz

Abstract

We derive a non-inflationary rate of capacity utilisation (NIRCU)—as recently proposed by Köberl and Lein (Can J Econ 44:673–694, 2011 )—based on a large Austrian firm-level panel dataset ranging from 1996 to 2011. By conditioning the current capacity utilisation of firms on their current and planned price adjustments, a micro-level NIRCU is defined as the level of capacity utilisation at which there is no need for the firm to adjust its prices. In contrast to other measures of inflationary pressure, this measure (1) is timely available without revisions and (2) does not imply any need for rather arbitrary methods or concepts such as statistical filtering or potential output. In accordance with the results in Köberl and Lein (Can J Econ 44:673–694, 2011 ), we find that the NIRCU performs well as a driving variable of Austrian inflation in various Phillips Curve estimations. Compared to other inflation driving variables, such as real unit labor cost, the output gap and the unemployment gap, it delivers reasonable parameter estimates which are in line with existing Phillips Curve estimations in the literature. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • 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.
    • Handle: RePEc:kap:empiri:v:41:y:2014:i:1:p:23-36
    DOI: 10.1007/s10663-013-9230-2
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    References listed on IDEAS

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    1. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
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    3. Eva M. Köberl & Sarah M. Lein, 2011. "The NIRCU and the Phillips curve: an approach based on micro data," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(2), pages 673-694, May.
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    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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