The Role of Capacity Utilization Rate at the Measuring Output Gap in Turkey

Abstract

The output gap is one of the basic indicators of the used determination of the inflation. It refers to the difference between the actual output and the potential output. If the output value is positive, there is inflationary pressure in the economy. If it's valued negative, there is deflationary pressure in the economy. The correct representation of the output gaps is of particular importance under the inflation targeting regime. In the literature, it is seen that industrial production index is highly used as output indicators. In the study is search answer the “The manufacturing capacity utilization rate is more effective indicator than industrial production index indicator of determining the output gap in Turkey,? question. This study is examined the relationship between work, capacity utilization rate, industrial production index and consumer-based inflation, using theVector Autoregressive Model (VAR) and Relative Sensitivity Analyzes for the period2002-2016. As a result of the study, it is seen that the capacity utilization rate of the manufacturing industry is an effective indicator as output gap on inflation compared to the industrial production index.