Munich Personal RePEc Archive

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

Crosilla, Luciana and Leproux, Solange and Malgarini, Marco (2014): The impact of the crisis on italian industrial capacity: an assessment based on the istat manufacturing survey.

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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.

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