IDEAS home Printed from https://ideas.repec.org/p/cbi/wpaper/2-rt-96.html
   My bibliography  Save this paper

Capacity Utilisation in Irish Manufacturing

Author

Listed:
  • Kenny, Geoff

    (Central Bank and Financial Services Authority of Ireland)

Abstract

Capacity Utilisation (CU) measures play an important role in practical economic analysis. Variation in the extent to which existing capacity is being utilised provides an indication of how the supply side of a particular industry, sector or economy is evolving relative to its demand side. Such measures have been used to explain changes in investment flows and the general economic environment. However, the primary significance of CU measures stems from their usefulness in uncovering upward pressure on the price level (i.e. inflation). This paper reviews some of the more common methods of calculating measures of capacity utilisation. All methods are shown to have their own specific advantages and disadvantages. The available monthly survey measures are currently the most accessible and perhaps the most useful from a policy viewpoint given the high frequency with which they become available. However, there is a large degree of uncertainty about what these surveyed measures actually mean. The paper has also applied the recently popularised cost function approach to measuring CU. In recognition of the dichotomy which characterises Irish industry, the model was also fitted to two individual sub-sector classifications: Hi-technology and Traditional manufacturing. The results suggest that a substantial degree of excess capacity existed in Irish manufacturing between 1970 and 1990. The constructed CU measure is also examined as a possible indicator of inflationary pressure. No significant relationship between CU and inflation was found in either the Total or Hi-Technology sectors. However, the CU ratio for the Traditional sector was found to be significantly positively related to Irish inflation.

Suggested Citation

  • Kenny, Geoff, 1996. "Capacity Utilisation in Irish Manufacturing," Research Technical Papers 2/RT/96, Central Bank of Ireland.
    • Handle: RePEc:cbi:wpaper:2/rt/96
    as

    Download full text from publisher

    File URL: https://centralbank.ie/docs/default-source/publications/research-technical-papers/02rt96---capacity-utilisation-in-irish-manufacturing-(kenny).pdf?sfvrsn=4
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Bradley, John & FitzGerald, John D. & Kearney, Ide, 1991. "Economic Time Series for Irish Industry and Services," Papers TP05, Economic and Social Research Institute (ESRI).
    2. Bradley, John & Fitzgerald, John, 1988. "Industrial output and factor input determination in an econometric model of a small open economy," European Economic Review, Elsevier, vol. 32(6), pages 1227-1241, July.
    3. Catherine J. Morrison, 1985. "On the Economic Interpretation and Measurement of Optimal Capacity Utilization with Anticipatory Expectations," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(2), pages 295-309.
    4. Callan, Tim & FitzGerald, John, 1989. "Price Determination in Ireland: Effects of Changes in Exchange Rates and Exchange Rate Regimes," Papers ME179, Economic and Social Research Institute (ESRI).
    5. Morrison, Catherine J, 1986. "Structural Models of Dynamic Factor Demands with Nonstatic Expectations: An Empirical Assessment of Alternative Expectations Specifications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 27(2), pages 365-386, June.
    6. Kearney, Ide, 1991. "The Computerised Databank of the CII/ESRI Monthly Business Survey Data," Papers TP06, Economic and Social Research Institute (ESRI).
    7. Bradley, John & Fitz Gerald, John & Kearney, Ide, 1993. "Modelling supply in an open economy using a restricted cost function," Economic Modelling, Elsevier, vol. 10(1), pages 11-21, January.
    8. Jacques R. Artus, 1977. "Measures of Potential Output in Manufacturing for Eight Industrial Countries, 1955-78 (Estimation du potentiel de production relative au secteur manufacturier de huit pays industriels, 1955-78) (Medic," IMF Staff Papers, Palgrave Macmillan, vol. 24(1), pages 1-35, March.
    9. Berndt, Ernst R & Morrison, Catherine J, 1981. "Capacity Utilization Measures: Underlying Economic Theory and an Alternative Approach," American Economic Review, American Economic Association, vol. 71(2), pages 48-52, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Quinn, Terry & Kenny, Geoff & Meyler, Aidan, 1999. "Inflation Analysis: An Overview," MPRA Paper 11361, University Library of Munich, Germany.
    3. Slevin, Geraldine, 2001. "Potential Output and the Output Gap in Ireland," Research Technical Papers 5/RT/01, Central Bank of Ireland.
    4. John K. Ashton, 2003. "Capital Utilisation and Scale in the English and Welsh Water Industry," The Service Industries Journal, Taylor & Francis Journals, vol. 23(5), pages 137-149, November.
    5. Kenny, Geoff & McGettigan, Donal, 1996. "Non-Traded, Traded and Aggregate Inflation In Ireland (Part 2)," Research Technical Papers 3B/RT/96, Central Bank of Ireland.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bradley, John & Whelan, Karl & Wright, Jonathan, 1995. "HERMIN Ireland," Economic Modelling, Elsevier, vol. 12(3), pages 249-274, July.
    2. Morgenroth, Edgar & FitzGerald, John & FitzGerald, John, 2006. "Summary and Conclusions," Book Chapters, in: Morgenroth, Edgar (ed.),Ex-Ante Evaluation of the Investment Priorities for the National Development Plan 2007-2013, chapter 24, pages 317-333, Economic and Social Research Institute (ESRI).
      • Baker, Terence J. & FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Summary and Conclusions," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 12, pages 339-352, Economic and Social Research Institute (ESRI).
    3. M. Ishaq Nadiri & Ingmar Prucha, 2001. "Dynamic Factor Demand Models and Productivity Analysis," NBER Chapters, in: New Developments in Productivity Analysis, pages 103-172, National Bureau of Economic Research, Inc.
    4. Baker, Terence J. & Duffy, David & Duggan, Delma & FitzGerald, John & Honohan, Patrick, 1996. "The Manufacturing Sector," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 7, pages 174-221, Economic and Social Research Institute (ESRI).
    5. Duggan, Delma & FitzGerald, John & Johnston, Justin & Kelly, Jane & FitzGerald, John & Honohan, Patrick, 1996. "The Macroeconomy in Stable Conditions," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, pages 50-86, Economic and Social Research Institute (ESRI).
    6. Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Adapting to Regime Change," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, pages 10-36, Economic and Social Research Institute (ESRI).
    7. Baker, Terence J. & FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Introduction," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 1, pages 1-9, Economic and Social Research Institute (ESRI).
    8. Duggan, Delma & FitzGerald, John & Johnston, Justin & Kavanagh, Ella & FitzGerald, John & Honohan, Patrick, 1996. "Macroeconomic Response to Shocks," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 5, pages 105-142, Economic and Social Research Institute (ESRI).
    9. Kelly, Jane & FitzGerald, John & Honohan, Patrick, 1996. "The Tourism Sector," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 11, pages 321-338, Economic and Social Research Institute (ESRI).
    10. FitzGerald, John & Honohan, Patrick & FitzGerald, John & Honohan, Patrick, 1996. "Overall Macroeconomic Assessment," Book Chapters, in: Baker, Terence J. (ed.),Economic Implications for Ireland of EMU, chapter 6, pages 143-169, Economic and Social Research Institute (ESRI).
    11. Baker, Terence J. & FitzGerald, John & Honohan, Patrick, 1996. "Economic Implications for Ireland of EMU," Research Series, Economic and Social Research Institute (ESRI), number PRS28, July.
    12. Alan Barrett & Adele Bergin & David Duffy, 2006. "The Labour Market Characteristics and Labour Market Impacts of Immigrants in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 37(1), pages 1-26.
    13. Bergin, Adele & Conefrey, Thomas & FitzGerald, John & Kearney, Ide & Znuderl, Nusa, 2013. "The HERMES-13 macroeconomic model of the Irish economy," Papers WP460, Economic and Social Research Institute (ESRI).
    14. FitzGerald, John & Bergin, Adele & Conefrey, Thomas & Diffney, Sean & Duffy, David & Kearney, Ide & Lyons, Sean & Malaguzzi Valeri, Laura & Mayor, Karen & Richard S. J. Tol, 2008. "Medium-Term Review 2008-2015, No. 11," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR11, August.
    15. Shengyu Liu & Heng Yin, 2017. "A Structural Method to Estimate Firm-level Capacity Utilization and Application to Chinese Heavy Industries," Annals of Economics and Finance, Society for AEF, vol. 18(1), pages 1-28, May.
    16. H. Kim, 1999. "Economic Capacity Utilization and its Determinants: Theory and Evidence," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(4), pages 321-339, December.
    17. Bergin, Adele & Duffy, David & Foley, Daniel & Garcia Rodriguez, Abian & Lawless, Martina & Mc Inerney, Niall & McQuinn, Kieran, 2016. "Ireland’s Economic Outlook: Perspectives and Policy Challenges," Forecasting Report, Economic and Social Research Institute (ESRI), number EO1 edited by Bergin, Adele & Morgenroth, Edgar & McQuinn, Kieran, August.
    18. Lu, Juan & Li, He, 2022. "Can high-speed rail improve enterprise capacity utilization? A perspective of supply side and demand side," Transport Policy, Elsevier, vol. 115(C), pages 152-163.
    19. Sarbapriya, Ray & Mihir, Kumar Pal, 2011. "An Application of Economic Capacity Utilization to the Measurement of Total Factor Productivity Growth: Empirical Evidence from Indian Fertilizer Industry," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(1), pages 125-142, March.
    20. Michalis Nikiforos, 2011. "On the Desired Rate of Capacity Utilization," Working Papers 1116, New School for Social Research, Department of Economics.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbi:wpaper:2/rt/96. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fiona Farrelly (email available below). General contact details of provider: https://edirc.repec.org/data/cbigvie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.