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The impact of the crisis on italian industrial capacity: an assessment based on the istat manufacturing survey

Author

Listed:
  • Crosilla, Luciana
  • Leproux, Solange
  • Malgarini, Marco

Abstract

Traditional measures of the output gap rely on statistical filtering of trended series, results being highly sensitive to the method chosen, especially at endpoints (Oprhanides and van Norden, 2002). Following Koberl and Lein (2011) and Fessler et al. (2014), the aim of our paper is to derive ameasure of capacity utilisation gap for Italy, usually referred to in the literature asthe Non-Inflationary Rate of Capacity Utilisation (NIRCU).The NIRCU is defined as the capacity utilisation rate at which firms do not feel any pressure to adjust prices; the main advantages of the methodare (1) that it is micro-founded, being based on firm level information about capacity and prices, (2) that it is available almost in real time and (3) that it does not need any prior statistical filtering. Our NIRCU performs well as an indicator of inflationary pressures in a standard Phillips-curve framework.Results also show that the capacity gap after the crisis is in Italy at its highest in the last 25 years, remaining more than 5 percentage points above the current level of capacity utilisation, a finding with relevant implication for both monetary and fiscal policies.

Suggested Citation

  • 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.
  • Handle: RePEc:pra:mprapa:67531
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    File URL: https://mpra.ub.uni-muenchen.de/67531/1/MPRA_paper_67531.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. Galí, Jordi & Gertler, Mark, 1999. "Inflation Dynamics: A Structural Economic Analysis," CEPR Discussion Papers 2246, C.E.P.R. Discussion Papers.
    3. Gali, Jordi & Gertler, Mark, 1999. "Inflation dynamics: A structural econometric analysis," Journal of Monetary Economics, Elsevier, vol. 44(2), pages 195-222, October.
    4. Henzel, Steffen & Wollmershäuser, Timo, 2008. "The New Keynesian Phillips curve and the role of expectations: Evidence from the CESifo World Economic Survey," Economic Modelling, Elsevier, vol. 25(5), pages 811-832, September.
    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.
    6. Mark E. Doms & Timothy Dunne, 1998. "Capital Adjustment Patterns in Manufacturing Plants," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(2), pages 409-429, April.
    7. Ricardo J. Caballero & Eduardo M. R. A. Engel & John C. Haltiwanger, 1995. "Plant-Level Adjustment and Aggregate Investment Dynamics," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 26(2), pages 1-54.
    8. A'Hearn, Brian & Woitek, Ulrich, 2001. "More international evidence on the historical properties of business cycles," Journal of Monetary Economics, Elsevier, vol. 47(2), pages 321-346, April.
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    More about this item

    Keywords

    inflation; capacity utilisation; NIRCU; Phillips Curve;

    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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