The Inflation-Capacity Utilization Conundrum: Evidence from the Canadian Economy

16 Pages Posted: 22 Aug 2008

See all articles by Lefteris Tsoulfidis

Lefteris Tsoulfidis

University of Macedonia - Department of Economics

Theologos Dergiades

University of Macedonia - Department of International and European Studies

Date Written: August 20, 2008

Abstract

In this article we develop a new, simple and, at the same time, general method for the estimation of the rate of capacity utilization (CU). This method draws on the standard theory of economic growth and makes use of the structural vector autoregression (SVAR) system of equations estimating technique with long-run restrictions. The measure of CU that we derive for the Canadian economy displays a similar profile with the corresponding survey measure. The results of the econometric analysis, however, show that the explanatory content of the SVAR measure with regard to the acceleration of inflation exceeds that of the survey, especially when it comes to the post-1990 years.

Keywords: Capacity utilization, Inflation, Economic Growth, SVAR

JEL Classification: C22, E31, E32, E37

Suggested Citation

Tsoulfidis, Lefteris and Dergiades, Theologos, The Inflation-Capacity Utilization Conundrum: Evidence from the Canadian Economy (August 20, 2008). Applied Econometrics and International Development, Vol. 6, No. 2, 2006, Available at SSRN: https://ssrn.com/abstract=1241658

Lefteris Tsoulfidis (Contact Author)

University of Macedonia - Department of Economics ( email )

Thessaloniki, 54006
Greece

Theologos Dergiades

University of Macedonia - Department of International and European Studies ( email )

Egnatia str. 156
Thessaloniki, 54636
Greece

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