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Measuring capacity utilisation in the italian manufacturing sector: a comparison between time series and survey estimates

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  • Marco Malgarini
  • Antonio Paradiso

Abstract

The aim of this paper is to provide an interpretation of the measure of capacity utilisation provided by the European Union harmonised survey on the Italian manufacturing sector. In doing so, we evaluate its ability to correctly track cyclical turning points and its contribution in explaining consumer price index (CPI) inflation. The survey based measure results are a good co-incident indicator of business cycle, however it is generally outperformed by time series models in explaining inflation. We conclude that the standard “output gap” interpretation of the survey results is broadly confirmed by the data, however we cannot rule out at this stage that survey respondents may also consider the alternative “variable capacity utilisation” concept in answering the survey question. Keywords: Capacity utilisation, co-integration, unobserved component models, VAR.JEL Classification: E32, C22, E37

Suggested Citation

  • Marco Malgarini & Antonio Paradiso, 2012. "Measuring capacity utilisation in the italian manufacturing sector: a comparison between time series and survey estimates," OECD Journal: Journal of Business Cycle Measurement and Analysis, OECD Publishing, Centre for International Research on Economic Tendency Surveys, vol. 2012(2), pages 5-19.
    • Handle: RePEc:oec:stdkab:5k8znwp2nts8
    DOI: 10.1787/jbcma-2012-5k8znwp2nts8
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    Citations

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    Cited by:

    1. Malgarini, Marco, 2012. "Industrial production and Confidence after the crisis: what's going on?," MPRA Paper 53813, University Library of Munich, Germany.
    2. Sarah Lima & Marco Malgarini, 2016. "Does a Survey Based Capacity Utilization Measure Help Predicting Brazilian Output Gap in Real-Time?," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 12(1), pages 119-139, September.
    3. Andrea Locatelli & Libero Monteforte & Giordano Zevi, "undated". "Heterogeneous Fall in Productive Capacity in Italian Industry during the 2008-13 Double-Dip Recession," Questioni di Economia e Finanza (Occasional Papers) 303, Bank of Italy, Economic Research and International Relations Area.
    4. Libero Monteforte & Giordano Zevi, 2016. "An inquiry into manufacturing capacity in Italy after the double-dip recession," Questioni di Economia e Finanza (Occasional Papers) 302, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    capacity utilisation; co-integration; unobserved component models; var.jel classification: e32; c22; e37;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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