The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach

Demir, C; Özcan, SE

The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach

Authors

Abstract

This study investigates the asymmetric impacts of capacity utilization rate and producer prices on the industrial production index in T & uuml;rkiye over the 2007:1-2022:9 period. Approximating actual capacity to full capacity and enabling firms to produce at lower costs are primary macroeconomic objectives for every country. Therefore, Increases in capacity utilization are expected to positively affect and increases in producer prices affect to negatively affect industrial production. This study examined whether or not these factors cause asymmetric increases and decreases in industrial production. According to the nonlinear autoregressive distributed lag (NARDL) model results, a 1% increase in the capacity utilization rate raises industrial production by 1.63% while a 1% decrease in the same factor reduces industrial production by 1.27%. On the other hand, a 1% increase in producer prices reduces industrial production by 0.06% while decreases in the same factor have no statistically significant impact. The fact that positive and negative shocks do not affect at the same rate implies that the shocks from capacity utilization rate and producer prices on industrial production have an asymmetric structure. This evidence has also been proven through the rejection of the symmetry hypotheses as tested by the Wald test.