CAPACITY UTILIZATION RATE OF MANUFACTURING INDUSTRY AND RELATIONSHIP BETWEEN THE REAL SECTOR CONFIDENCE INDEX: AN EMPIRICAL STUDY FOR TURKEY

ABSTRACT There are various indicators published in the current production conditions of the manufacturing industry for information about future trends and expectations. In this study, it has been empirically tested whether the real sector confidence index, which is one of the sub-components of the economic confidence index from the basic industrial indicators, affects the price index reflecting the producer costs according to the physical capacity utilization in the manufacturing sector. For this purpose, Central Bank of the Republic of Turkey Economic Business Statistics and Turkish Statistical Institute Economic Confidence Index compiled from electronic data distribution system monthly data for 2007:1-2019:1 period 'Manufacturing Industry Capacity Utilization Rate' and 'Real Sector Confidence Index' variables were used. In the analysis, ADF, PP, KPSS constant and fixed-trend models were applied from the traditional unit root tests and the bandwidth was determined by Newey-West method. In the KPSS unit root test, both the ADF and PP unit root test statistic showed that both of the variables became static as a result of the first difference taking. According to Granger Causality test analysis, it is determined that there is a bidirectional causality relationship between two variables. Both test results show that there is a long-term interaction between Real Sector Confidence Index (RSCI) and Capacity Utilization Ratio (CUR)