Inflation and Capacity Constraints in Australian Manufacturing Industry
Version of Record online: 18 JUN 2003
Volume 79, Issue 245, pages 182–195, June 2003
How to Cite
Shepherd, D. and Driver, C. (2003), Inflation and Capacity Constraints in Australian Manufacturing Industry. Economic Record, 79: 182–195. doi: 10.1111/1475-4932.t01-1-00097
- Issue online: 18 JUN 2003
- Version of Record online: 18 JUN 2003
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.