Intersectoral transactions and asymmetries in the output-inflation nexus

摘要

This paper investigates the inflationary impact of demand pressure through markups. A multisectoral model of Italian industry is used to construct an aggregate indicator of the output gap which is sensitive to the occurrence of sectoral capacity bottlenecks. The econometric results suggest that the key variable in explaining industrial producer price dynamics is not the average value of the output gap in industry as a whole, but rather its level in critical sectors, i.e. those where capacity utilization is pushed close to the limit by intersectoral transactions. Furthermore, the evidence found indicates that the inflationary effect of high levels of domestic demand is significantly reinforced if foreign prices increase in relative terms, for example because of a devaluation.