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A NEW METHOD FOR THE ESTIMATION OF CAPACITY UTILIZATION: THEORY AND EMPIRICAL EVIDENCE FROM 14 EU COUNTRIES
Author(s) -
Dergiades Theologos,
Tsoulfidis Lefteris
Publication year - 2007
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/j.0307-3378.2007.00263.x
Subject(s) - measure (data warehouse) , econometrics , economics , vector autoregression , inflation (cosmology) , sample (material) , estimation , european commission , empirical measure , commission , macroeconomics , computer science , european union , mathematics , statistics , international economics , finance , physics , management , chromatography , database , theoretical physics , chemistry
In this paper, we develop a new and at the same time simple method of obtaining a measure of the rate of capacity utilization (CU) which makes use of the structural vector autoregression (SVAR) system of equation estimating technique with long‐run restrictions. The measure of CU that we derive for each of 14 EU countries replicates to a great extent the European Commission's Directorate General for Economic and Financial Affairs (ECFIN) measure. On closer examination we find that the in‐sample explanatory content with respect to the inflation rate of the SVAR measure exceeds more often than not that of the ECFIN's measure; however, the out‐of‐sample forecasting performance of the two models is approximately equivalent.