Inflation and Capacity Constraints in Australian Manufacturing Industry |
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Authors: | David Shepherd Ciaran Driver |
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Affiliation: | Imperial College, University of London, UK;, Imperial College, University of London, UK;  |
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Abstract: | In the present paper we estimate a model of price-cost inflation for Australia using business survey responses of firms in the manufacturing sector. The data allow us to circumvent a number of key statistical problems, related in particular to the measurement of costs and structural changes in the model. Equally important, the data allow a new and more detailed perspective on the nature of supply constraints affecting inflation in the manufacturing sector. A new finding is that capital constraints have been more important in generating inflationary pressure than labour constraints or general indicators of capacity utilisation. |
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