Research Article


DOI :10.26650/JEPR1247326   IUP :10.26650/JEPR1247326    Full Text (PDF)

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

Caner DemirSüleyman Emre Özcan

This study investigates the asymmetric impacts of capacity utilization rate and producer prices on the industrial production index in Türkiye 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.

JEL Classification : C22 , E22 , E31
DOI :10.26650/JEPR1247326   IUP :10.26650/JEPR1247326    Full Text (PDF)

Türkiye’de Sanayi Üretimi, Kapasite Kullanım Oranı ve Üretici Fiyatları Arasındaki Asimetrik İlişki: Doğrusal Olmayan ARDL Modeli Yaklaşımı

Caner DemirSüleyman Emre Özcan

Bu çalışmada Türkiye’de kapasite kullanım oranı ve üretici fiyatlarının sanayi üretim endeksi üzerindeki etkileri, asimetrik şokların da göz önünde bulundurulmasıyla 2007:1-2022:9 dönemi için incelenmiştir. Fiili kapasitenin toplam kapasiteye yaklaştırılması ve üreticilerin yüksek olmayan maliyetlerle üretim yapması her ülke için öncelikli makroekonomik amaçlar arasındadır. Bu nedenle, kapasite kullanım oranındaki artışların sanayi üretimini olumlu, üretici fiyatlarındaki artışların ise olumsuz etkilemesi beklenmektedir. Bu çalışmada ise bu faktörlerden kaynaklanan sanayi üretimi artış ve azalışlarının ne derecede olduğu ve asimetrik bir şekilde gerçekleşip gerçekleşmediği incelenmektedir. Doğrusal olmayan gecikmesi dağıtılmış otoregresif (NARDL) model sonuçlarına göre, Türkiye’de kapasite kullanım oranında meydana gelen %1’lik bir artış sanayi üretimini %1,63 artırırken %1’lik bir düşüş sanayi üretimini %1,27 azaltmaktadır. Öte yandan, üretici fiyatlarındaki %1’lik bir artış sanayi üretimini %0,06 azaltırken bu faktördeki düşüşler ise sanayi üretimi üzerinde istatistiki olarak anlamlı bir etkigöstermemektedir. Pozitif ve negatif şokların aynı oranda etki etmemesi ve hatta üretici fiyatlarındaki negatif şokların anlamlı bir etkisinin dahi gözlenememesi, Türkiye’de kapasite kullanımı ve üretici fiyatlarından sanayi üretimine yansıyan şokların asimetrik bir yapıda olduğuna işaret etmekte olup, bu durum Wald Testi aracılığıyla reddedilen simetri hipotezleri ile de teyit edilmiştir.

JEL Classification : C22 , E22 , E31

EXTENDED ABSTRACT


Industrial production is a major macroeconomic indicator due to being one of the main reasons for economic growth. Both developed and developing countries keep up with monthly industrial production index data to ensure targeted economic growth rates. Therefore, raising industrial production results in higher gross domestic product (GDP) levels. Approximating actual capacity to full capacity and enabling firms to produce at lower costs are primary macroeconomic objectives for every country. Thus, increases in capacity utilization are expected to positively affect and increases in producer prices to negatively affect industrial production. Based on this perspective, this study investigates the impacts of capacity utilization rate and producer prices on the industrial production index in Türkiye.

By reviewing the existing literature, studies on this subject are noticed to have dealt with this issue with the assumption of a linear relationship. The present study aims to observe the nonlinear impacts of capacity utilization rate and producer prices on the industrial production index. To do this, the study uses the nonlinear autoregressive distributed lag (NARDL) model, which separates the positive and negative shocks caused by the explanatory factors. The NARDL model is a modified version of the linear ARDL model developed by Peseran

and Shin (1999) and Peseran et al. (2001). This model has no requirements due to all the variables in the model being integrated in the same order; namely, the series can be I(0) (stationary at level) or I(1) (stationary at first difference). Thus, when some of the variables are stationary at first difference while others are stationary at levels one can continue with the cointegration test using the ARDL model, unlike other cointegration tests. Shin et al. (2014) went on to transform the linear ARDL model into an asymmetrical structure. The structure of the estimated NARDL model in the present study is shown in Eqs. 5 and 6. The variables for the logarithms of the industrial production index, capacity utilization rate, and producer price index are respectively abbreviated as LSAN, LKKO, and LUFE.

By utilizing the data obtained from the Central Bank of the Republic of Türkiye, the study constructed a data set covering the period of June 2007-September 2022. Due to the data being monthly, the total number of observations is 189. The empirical analysis section of the study first tests the stationarity of the variables (see Table 2). The augmented Dickey- Fuller unit root test suggests the LSAN and LUFE variables to not be stationary at level and LKKO to be stationary. On the other hand, the Dickey-Fuller generalized least squares (GLS) unit root test suggests the LUFE variable to not be stationary at level and the LSAN and LKKO variables to be stationary. Both tests also show all variables to be stationary at their first difference. Due to the variables being unsuitable for integrating in the same order, ARDL-based models should be used to fulfill the needs.

The NARDL cointegration test results in Table 3 show the F-statistics to exceed the critical values, which implies the presence of a cointegrating relationship among industrial production, capacity utilization rate, and producer prices. The next step estimates the longterm coefficients of the explanatory factors and applies some diagnostic tests. The results in Table 4suggest a 1% increase in the capacity utilization rate to raise industrial production by 1.63% and a 1% decrease in the same factor to reduce industrial production by 1.27%. On the other hand, a 1% increase in producer prices reduces industrial production by 0.06% while a 1% decrease in the same factor has 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. The diagnostic tests regarding the estimated model show no serial correlation, heteroskedasticity, or misspecification problem to be present in the model and the residuals to be normally distributed. The cumulative sum of the recursive residuals (CUSUM) and the cumulative sum of the squares of the recursive residuals (CUSUMSQ) plot tests are depicted in Figure 1 and Figure 2 and show the estimated coefficients to be stable and within the critical bounds of the model. Lastly, to check the robustness of the asymmetry, the previously estimated model was transformed into a stepwise regression model to test the symmetry hypothesis based on the coefficients of this model. The test results reveal both capacity utilization rate and producer prices to have asymmetric impacts on the industrial production index in Türkiye.

The findings from the study briefly suggest that in order to sustain economic growth in Türkiye, policymakers should first raise the capacity utilization rate and prevent any potential decrease in this indicator. Secondly, they should prevent increases in producer prices. However, the findings revealed no statistically significant favorable impact from decreases in producer prices. The ability of the NARDL model to permit asymmetric effects allows for differentiating policy designs against negative and positive shocks.


PDF View

References

  • Abdioğlu, Z. (2013). Türkiye için Enflasyonu Hızlandırmayan Kapasite Kullanım Oranı Tahmini, Journal of Yaşar University, 8(31), 5296-5323. google scholar
  • Arabacı, Ö. & Arabacı, R. Y. (2008). Kapasite Kullanım Oranları ve Enflasyon İlişkisi: Türkiye Örneği, Uludağ Üniversitesi İktisadi ve İdari Bilimler Fakültesi Dergisi, 27(2), 93-109. google scholar
  • Baek, J. & Kim, H. S. (2013). Is Economic Growth Good or Bad for the Environment? Empirical Evidence from Korea. EnergyEconomics, 36, 744-49. doi:10.1016/j.eneco.2012.11.020. google scholar
  • Daly, E. H. (1974). Steady-state economics versus growthmania: A critique of the orthodox conceptions of growth, wants, scarcity and efficiency. Policy Sciences, 5, 149-167. google scholar
  • Dickey, D. A., & Fuller, W. A. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American statistical association, 74(366a), 427-431. google scholar
  • Elliott, G., Rothenberg, T. J. & Stock, J. H. (1996). Efficient Tests for an Autoregressive Unit Root. Econometrica, 64:4, 813-836. google scholar
  • Gültekin, H. & Taştan, B. (2022). Covid-19 ve Enflasyonun Sanayi Üretim Endeksi Üzerindeki Etkisi, Journal of Economics and Administrative Sciences, 23(3), 790-799, DOI: https://doi.org/10.37880/cumuiibf.1110912 google scholar
  • Kırca, M. & Canbay, Ş. (2019). Türkiye’de Üretici Fiyat Endeksi ile Sanayi Üretim Endeksi Arasindaki Simetrik ve Asimetrik Nedensellik İlişkilerin Analizi. I. Uluslararası İktisat, İşletme ve Sosyal Bilimler Kongresi’nde sunulan bildiri, Karabük Üniversitesi ECONDER, Karabük Üniversitesi, Karabük. google scholar
  • Koç E., Kaya, K. & Şenel, M. C. (2016). Türkiye’de Sanayi Sektörü ve Temel Sanayi Göstergeleri - Sanayi Üretim Endeksi, Mühendis ve Makine, 57 (682), 42-53. google scholar
  • Koç E., Şenel, M. C. & Kaya, K. (2017). Türkiye’de Ekonomik Göstergeler - İmalat Sanayi Kapasite Kullanım Oranı, Mühendis ve Makine, 58(689), 1-22. google scholar
  • Meadows, D. H., Meadows, D. L., Randers, J. & Behrens, W. W. (1972). The limits to growth, a report for the Club of Rome’s project on the predicament of mankind. Universe Books. google scholar
  • Narayan, P. K. & Smyth, R. (2006). What Determines Migration Flows from Low-Income to High-Income Countries? An Empirical Investigation of Fiji-Us Migration 1972-2001. Contemporary Economic Policy, 24, 332-42. google scholar
  • Ogungbenle, S. (2022). Trade Openness, Manufacturing Capacity UtilizationRate and Output Expansion Nexus in Nigeria, European Journal of Science, Innovation and Technology, 2(1), 124-133. google scholar
  • Olorunfemi, S., Obamuyi, T. M., Adekunjo, F. O. & Ogunleye, E. O. (2013). Manufacturing Performance in Nigeria: Implication for Sustainable Development, Asian Economic and Financial Review, 3(9), 1195-1213. google scholar
  • Oshati, T., Ogechi, A. F. & Okotie, Y. S. (2020). Capacity Utilization and the Role of Services Sector in Industrialization of Nigeria, African Scholar Publications & Research International, 18(7), 171-197. google scholar
  • Öcal, M. F. (2013). Türkiye’de Sanayi Üretim Endeksi ve İmalat Sanayi Eğilim Göstergeleri Arasındaki İlişkinine Ekonometrik Analizi, Celal Bayar Üniversitesi Sosyal Bilimler Dergisi, 11(2), 242-258. google scholar
  • Panopoulou, E. & Pittis., N. (2004). A comparison of autoregressive distributed lag and dynamic OLS cointegration estimators in the case of a serially correlated cointegration error. The Econometrics Journal, 7, 585-617. google scholar
  • Pesaran, M. H. & Shin, Y. (1999). An Autoregressive Distributed Lag Modelling Approach to Cointegration Analysis. In Econometrics and Economic Theory in the 20th Century The Ragnar Frisch Centennial Symposium; Edited by Steinar Strom. Cambridge: Cambridge University Press, 371-413. google scholar
  • Pesaran, M. H., Shin, Y. & Smith, R. J. (2001) Bounds Testing Approaches to the Analysis of Level Relationships. Journal of Applied Econometrics, 16, 289-326. google scholar
  • Petek, A. & Şanlı, O. (2019). Türkiye’de Gayrisafi Yurtiçi Hasıla, Döviz Kurları ve Sanayi Üretim Endeksinin Kapasite Kullanım Oranları Üzerine Etkileri: Zaman Serileri Analizi, International Review of Economics and Management, 7(1), 49-73. google scholar
  • Pekçağlayan, B. (2021). Türkiye’de Sanayi Üretim Endeksinin Belirleyenleri: ARDL Modeli, İstanbul İktisat Dergisi, 71, 435-456. google scholar
  • Shin, Y., Yu, B., & Greenwood-Nimmo, M. (2014). Modelling asymmetric cointegration and dynamic multipliers in a nonlinear ARDL framework. In Festschrift in honor of Peter Schmidt (pp. 281-314). Springer, New York, NY. google scholar
  • Smaoui, F., Smaoui F. & Kammoun, N. (2022). The Response of Industrial Production to the Macroeconomic Factors: New Evidence for Tunisia, Global Scientific Journals, 10(9), 376-396. google scholar
  • TUİK (2022). https://data.tuik.gov.tr/Bulten/Index?p=Ekonomik-Guven-Endeksi-Aralik-2022-45565 google scholar
  • TUİK (2023a). https://data.tuik.gov.tr/Search/Search?text=iktisadi%20faaliyet google scholar
  • TUİK (2023b). https://data.tuik.gov.tr/Kategori/GetKategori?p=sanayi-114 google scholar
  • Yamaçlı, D. S. (2017). The Role of Capacity Utilization Rate at the Measuring Output Gap in Turkey, American Academic & Scholarly Research Journal, 9(4), 9-22. google scholar

Citations

Copy and paste a formatted citation or use one of the options to export in your chosen format


EXPORT



APA

Demir, C., & Özcan, S. (2023). The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach. Journal of Economic Policy Researches, 10(2), 525-543. https://doi.org/10.26650/JEPR1247326


AMA

Demir C, Özcan S. The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach. Journal of Economic Policy Researches. 2023;10(2):525-543. https://doi.org/10.26650/JEPR1247326


ABNT

Demir, C.; Özcan, S. The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach. Journal of Economic Policy Researches, [Publisher Location], v. 10, n. 2, p. 525-543, 2023.


Chicago: Author-Date Style

Demir, Caner, and Süleyman Emre Özcan. 2023. “The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach.” Journal of Economic Policy Researches 10, no. 2: 525-543. https://doi.org/10.26650/JEPR1247326


Chicago: Humanities Style

Demir, Caner, and Süleyman Emre Özcan. The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach.” Journal of Economic Policy Researches 10, no. 2 (Jul. 2024): 525-543. https://doi.org/10.26650/JEPR1247326


Harvard: Australian Style

Demir, C & Özcan, S 2023, 'The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach', Journal of Economic Policy Researches, vol. 10, no. 2, pp. 525-543, viewed 20 Jul. 2024, https://doi.org/10.26650/JEPR1247326


Harvard: Author-Date Style

Demir, C. and Özcan, S. (2023) ‘The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach’, Journal of Economic Policy Researches, 10(2), pp. 525-543. https://doi.org/10.26650/JEPR1247326 (20 Jul. 2024).


MLA

Demir, Caner, and Süleyman Emre Özcan. The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach.” Journal of Economic Policy Researches, vol. 10, no. 2, 2023, pp. 525-543. [Database Container], https://doi.org/10.26650/JEPR1247326


Vancouver

Demir C, Özcan S. The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach. Journal of Economic Policy Researches [Internet]. 20 Jul. 2024 [cited 20 Jul. 2024];10(2):525-543. Available from: https://doi.org/10.26650/JEPR1247326 doi: 10.26650/JEPR1247326


ISNAD

Demir, Caner - Özcan, Süleyman Emre. The Asymmetric Relationship Among Industrial Production, Capacity Utilization Rate, and Producer Prices in Türkiye: The Nonlinear ARDL Model Approach”. Journal of Economic Policy Researches 10/2 (Jul. 2024): 525-543. https://doi.org/10.26650/JEPR1247326



TIMELINE


Submitted04.02.2023
Accepted04.04.2023
Published Online02.08.2023

LICENCE


Attribution-NonCommercial (CC BY-NC)

This license lets others remix, tweak, and build upon your work non-commercially, and although their new works must also acknowledge you and be non-commercial, they don’t have to license their derivative works on the same terms.


SHARE




Istanbul University Press aims to contribute to the dissemination of ever growing scientific knowledge through publication of high quality scientific journals and books in accordance with the international publishing standards and ethics. Istanbul University Press follows an open access, non-commercial, scholarly publishing.