erc/metu
INTERNATIONAL CONFERENCE IN ECONOMICS  IV
September 13-16, 2000, Ankara

Capacity Utilization and Inflation in Turkey

Burçhan Sakarya (SPO)
Hasan Yurtoğlu (SPO)

Abstract

Capacity utilization is an important measure of resource use and economic activity concerning the real side of the economy. Hence, there has to be a relation between the capacity utilization rate and the inflation rate in line with the Phillips curve concept. Moreover, the long term inflation forecasting appears to be a central concern for the policy makers. Thus, alternative approaches other than utilising monetary aggregates gained importance, particularly the use of NAICU (Nonaccelerating Inflation Rate of Capacity Utilization). Accordingly, this paper examines the validity of this relation for the Turkish economy, and develops alternative models for the estimation of NAICU using several capacity utilization and inflation rates, and assesses the robustness of the results.

Economic Research Center
Middle East Technical University
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