Showing papers on "Capacity utilization published in 2018"

Measuring the capacity utilization of the coal sector and its decoupling with economic growth in China’s supply-side reform

Abstract: As the regulation of coal capacity utilization (CU) is a vital step to implement the optimization of energy mix, this article intends to measure the coal CU during 1990–2014 to scientifically evaluate the resources allocation of China’s coal industry. Hicks-neutral and Solow-neutral models are established respectively to assess the coal capacity considering the technical progress, and the decoupling index is applied to analyze the effect of coal CU on China’s economic growth. The main results are as follows: (1) the Solow-neutral model is more suitable for evaluating CU compared to the Hicks-neutral. (2) China’s coal CU has a 10-year cyclical fluctuation with a reasonable range of 89%–105%, and the overcapacity cordon is 85%. (3) Most years in the study period saw the decoupling effect of the coal CU and China’s economic growth from the decoupling index and Johansen Cointegration test. (4) A predicted expansive or strong recoupling effect will occur in the following China’s 13th Five-Year Plan period. The government is expected to adopt more supportive measures to ensure the quality of supply-side reform and guide China’s coal CU back to a reasonable level.

International co-movements in recessions

Abstract: Business cycle correlations are state-dependent and higher in recessions than in expansions. In this paper, I suggest a mechanism to explain why this is the case. For this purpose, I build an international real business cycle model with occasionally binding constraints on capacity utilization which can account for state-dependent cross-country correlations in GDP growth rates. The intuition is that firms can only use their machines up to a capacity ceiling. Therefore, in booms the growth of an individual economy can be dampened when the economy hits its capacity constraint. This creates an asymmetry that can spill-over to other economies, thereby creating state-dependent cross-country correlations in GDP growth rates. Empirically, I successfully test for the presence of capacity constraints using data from the G7 advanced economies in a Bayesian threshold autoregressive (T-VAR) model. This finding supports capacity constraints as a prominent transmission channel of cross-country GDP asymmetries in recessions compared to expansions.

A regional analysis of excess capacity in China's power systems

Abstract: China’s economy has entered a “new normal,” characterized by slower economic growth and widespread overcapacity in its industrial sectors. Nevertheless, construction of power plants, especially coal-fired plants, continues at a rapid pace. Our analysis examines the extent of overcapacity in China’s regional electricity grids. We show that already in 2014, the average reserve margin across China’s regional grids was roughly 28%, almost twice as high as a standard planning reserve margin in the U.S. In addition, we find large variations in reserve margins across regional power grids in China, with the highest reserve margin (64%) in the Northeastern grid. This paper examines future reserve margins across regions in China under three growth scenarios. The results suggest that the majority of China will not need new baseload coal power (at least for reliability purposes) before 2020, and potentially not until 2025, under the low- and mid-growth scenarios. Under the high-growth scenario, China’s central and eastern regions will need to import more power or built new capacity by 2020. As China’s energy sector enters this new normal, our results highlight the growing importance of establishing mechanisms — planning processes and markets — that coordinate generation and transmission investments across grid regions, and that align the country’s energy sector investments with its longer-term air quality and climate goals.

Economic activity and momentum profits: Further evidence

Abstract: We show that economic activity plays an important role in explaining momentum-based anomalies. A simple two-factor model containing the market and alternative indicators of economic activity as risk factors—industrial production, capacity utilization rate, retail sales, and a broad economic index—offers considerable explanatory power for the cross-section of price and industry momentum portfolios. Hence past winners enjoy higher average returns than past losers because they have larger macroeconomic risk. The model compares favorably with popular multifactor models used in the literature. Moreover, our model is consistent with Merton’s Intertemporal CAPM framework, since the macro variables forecast stock market volatility and future economic activity.

Economic activity and momentum profits

Abstract: We show that economic activity plays an important role in explaining momentum-based anomalies. A simple two-factor model containing the market and alternative indicators of economic activity as risk factors -- industrial production, capacity utilization rate, employees on nonfarm payrolls, retail sales, and a broad economic index -- offers considerable explanatory power for the cross-section of price and industry momentum portfolios. The model compares favorably with alternative multifactor models and is consistent with Merton's Intertemporal CAPM framework. Moreover, the model's fit is generally higher for value-weighted than for equal-weighted portfolios. Economic activity is, however, significantly less successful in explaining the earnings momentum anomaly.

Refining in Nigeria: history, challenges and prospects

Abstract: There are four major existing refineries as follows: Thus, the total installed capacity is 445,000 bpsd. These plants in the last 15–20 years had a poor operating record with average capacity utilization hovering between 15 and 25% per annum. As a result, 70–80% of the national petroleum products demand is met through import. As at 2017, the aggregate demand of petroleum products in Nigeria was equivalent to 750,000 bpsd. Hence, there is ample scope for investment in new plants and revamp of the existing ones to make them more efficient. This paper traces the history of refining in Nigeria, highlights the current poor record of capacity utilization, proffers solutions for improving their viability, and presents prospects for growth of the industry in Nigeria.

An empirical test of the Post-Keynesian growth model applied to functional income distribution and the growth regime in Brazil

Abstract: The main purpose of this paper is to empirically investigate whether, between 1970 and 2008, the Brazilian economy was profit-led or wage-led. To this end, we approach a canonical post-Keynesian growth model (PKGM) to estimate certain vector autoregressive (VAR) models and perform Granger non-causality tests. Three main results are extracted from the generalized impulse-response functions provided by the VAR models. First, a positive profit-share innovation affects economic growth and capacity utilization rate, both in the same direction, suggesting a profit-led pattern. Second, a profit share shock positively affects both the ratio actual/potential output, and capital accumulation, reinforcing the previous result. Third, a capacity utilization shock is shown to positively affect both output growth and capital accumulation via the accelerator effect. On the one hand, the pairwise Granger non-causality test does not provide any evidence of causality running from profit share to economic growth or c...

Financial Development and Manufacturing Performance: The Nigerian Case

Abstract: The study focused on financial sector development and manufacturing performance in Nigeria over the period of 1981 to 2015. In the study, three indicators such as manufacturing capacity utilization, manufacturing output and manufacturing value added were employed to proxy manufacturing performance while money supply as a percentage of GDP, domestic credit to the private sector and liquidity ratio were employed to proxy financial development. The study observed that credit to the private sector and money supply positively but insignificantly enhanced capacity utilization and output, but negatively impacted value added of the manufacturing sector in the short run. There is slight improvement in the long where both money supply and credit to private sector exert positive impact manufactured output. Hence, it becomes crucial for commercial banks to make available certain percentage of their profits for industrial expansion in order to create linkages between both sectors.

Capacity expansion under regulatory uncertainty: A real options-based study in international container shipping

Abstract: We present a real options model for capacity expansion that introduces uncertainty about potential future regulation (regulatory uncertainty) and key characteristics of capacity decisions: investment with time to build, divestment, the option to charter, and operating flexibility. Regulatory uncertainty is modelled as a possible jump in operating, investment, and charter costs during the simulation horizon. We find that regulatory uncertainty with grandfathering (the extant fleet is exempt from compliance) promotes high up-front investment leading to excess capacity and increased emissions. However, regulatory uncertainty without grandfathering reduces investment and emissions and the use of more flexible capacity options, such as chartering.

Some Characteristics of the Decline in Manufacturing Capacity Utilization

Abstract: In this note, we provide several observations regarding trends in manufacturing capacity utilization rates using data from the Federal Reserve Board and the Census Bureau. The note does not aim to consider all potential explanations for the decline in utilization rates, and indeed we do not find a single root cause of the decline. We do, however, attempt to narrow the scope of potential explanations and contribute contemporary data to the existing commentary.

Nonlinear Taylor rules: evidence from a large dataset

Abstract: In this paper we estimate nonlinear Taylor rules over the 1986-2008 sample time period and augment the traditional Taylor rule by including principal components to better model Federal Reserve policy. Including principal components is useful in that they extract information about the overall economy from multiple economic indicators in a statistically optimal way. Additionally, given that uncertainty may influence Federal Reserve decisions, we incorporate an uncertainty index in the reaction function of the Federal Reserve. We find substantial evidence that the Federal Reserve responded to increases in macroeconomic uncertainty by cutting the Federal Funds rate over the sample period. We also find evidence that the Federal Reserve responded aggressively to increases in capacity utilization, especially when the inflation rate was above 2%.

Analyzing Capacity Utilization and Travel Patterns of Chinese High-Speed Trains: An Exploratory Data Mining Approach

Abstract: Train capacity utilization (TCU), usually represented by passenger load factor (PLF), is a critical measure of effectiveness for rail operation In literature, efforts are usually made to improve capacity utilization by optimizing rail operation and management strategies Comparably little attention is paid to analyzing the factors that affect TCU and to understanding the behavioral patterns behind it This paper applies exploratory data mining techniques to a 3-month long real world train operation data of the Beijing-Shanghai High-Speed Railway Principal component analysis (PCA) is conducted to find the principal components that can efficiently represent the collected data Clustering techniques are then applied to understand the unique characteristics that affect PLF and the travel pattern The findings can be further used to guide train operation planning and facilitate better decision-making

Excess Capacity and Effectiveness of Policy Interventions: Evidence from the Cement Industry

Abstract: Excess production capacity has been a major concern in many countries, in particular, when an industry faces declining demand. Strategic interaction among firms might delay efficient scrappages of production capacity, and policy interventions that eliminate such strategic incentives may improve efficiency. This paper empirically studies the effectiveness of policy interventions in such environment, using plant-level data on the Japanese cement industry. Our estimation results show that a capacity coordination policy that forces firms to reduce their excessive production capacity simultaneously can effectively reduce excess capacity without distorting firms' scrappage decisions or increasing the market power of the firms.

Downshifting in the Fast Lane: A Post-Keynesian Model of a Consumer-Led Transition

Abstract: If the world’s countries seriously tackle the climate targets agreed upon in Paris, their citizens are likely to experience substantial changes in production, consumption, and employment. We present a long-run post-Keynesian model for studying the potential implications of a major transition on macroeconomic stability and employment. It is a demand-led model in which firms have considerable but not absolute freedom to administer prices, while household consumption exhibits inertia. Firms continually seek input-saving technological improvements that, in aggregate, tie technological progress to firms’ cost structures. Together with firm pricing strategies and wage setting, the productivities of different inputs determine the functional income distribution. Saving and investment, and production and purchase of consumption goods, are undertaken by different economic actors, driven by income and capacity utilization, with the possibility that productive capacity exceeds, or falls short of, effective demand. The model produces business cycles and long waves driven by technological change. We present results for a “downshifting” scenario in which households voluntarily withdraw labor, and discuss the implications of downshifting for stability, growth, and employment. We contrast the downshifting scenario with ones in which households reduce consumption without withdrawing from the labor pool.

Serbian agriculture loans with the aim of improving the current situation

Abstract: Agriculture is characterized by a number of specifcities (seasonal and organic character, high risks of the production cycle, slow turnover of capital, inability to specialize production and low capacity utilization), due to which it is more demanding in terms of fnancing than other economic activities.Considering that the agriculture is one of the most important branches of the economy, which even in such difficult conditions and circumstances still yields profts, the subject of this work is to discuss the conditions of fnancing both by the state and by commercial banks, without which it is almost impossible to imagine the process of agricultural production. The aim of the paper is to point out the importance of stable and continuous fnancing of agriculture. Unfortunately, interest rate subsidy programs do not include consultations with the fnancial sector when programs are designed, and as a result, the way in which the programs are built does not motivate banks to increase lending to the agriculture sector. Farms need constant fnancial support because of the need to invest in production all at once and at a large scale, in accordance with the nature of production, the long retention period of the assets involved, ie the low turnover of the invested funds, and the low proft that the primary agricultural production generates makes it impossible to create own accumulation, or own sources of fnancing.

From boom to bust: an operational perspective of demand bubbles

Abstract: When demand exceeds supply, retailers hedge against shortages by placing multiple orders with multiple suppliers, exceeding customer demand and leading to excess capacity, excess inventory, low capacity utilization and financial losses. This paper provides a comprehensive causal loop diagram and a formal mathematical model of a subset of supplier–retailer relationships. We obtain closed‐form solutions when supplier capacity is fixed, and analyze simulation dynamics when it is variable. Sensitivity analyses provide a deeper understanding of parameters that contribute to demand bubbles and insight on improvement policies. For instance, the ability of the supplier to build capacity quickly can reduce bubble size. The time it takes retailers to perceive and react to supply availability is an important lever in controlling demand bubbles. When retailers learn of shortages with a delay, their reaction is also delayed, which stabilizes the supply chain. © 2018 System Dynamics Society

Are supply curves convex? Implications for state-dependent responses to shocks

Abstract: This paper studies whether responses to shocks are state-dependent. To guide our empirical analysis we develop a putty-clay model in which short-run capacity constraints generate a convex supply curve at the industry level. Using a sufficient statistics approach, we estimate the model and find strong support for state- dependent responses to shocks. Industries with low initial capacity utilization rates expand production much more after dollar depreciations or defense spending shocks than industries that produce close to their capacity limit. Further, prices rise after such demand shocks only if the initial level of capacity utilization is high. Our evidence supports the view that supply curves are convex at the industry level and suggests that policies that raise demand are more effective during slumps.

Financial power and development potential of environmentally responsible medium sized enterprises in the Serbian industrial sector

Abstract: The aim of the research is to determine the economic and financial power of medium-sized enterprises registered in the Republic of Serbia (RS) in the sector C: Manufacturing and an assessment of the development potential of environmentally responsible enterprises The focus of the research is on environmentally responsible enterprises ie "green enterprises" for there is a need to search for ways to improve the economic sustainability of green business The subject of the research refers to values of financial performance of enterprises in the period 2011-2015 Economic and financial power of enterprises was assessed by using the method of financial analysis Financial analysis was carried out based on the information disclosed in the official financial statements of enterprises which are publicly available on the website of the Business Registers Agency With the application of financial analysis, the yield, asset and financial position of enterprises was determined In order to assess the yield position of enterprises, an analysis of the structure and arrangement of total revenues, structure and arrangement of gross financial result and profitability was performed In order to assess the asset position of enterprises, an analysis of the structure and source of assets and of the efficiency of current asset management was performed, and for the purpose of assessing financial position of enterprises an analysis of liquidity, solvency and indebtedness was conducted The analysis of the reasons medium-sized industrial enterprises are unprofitable is conducted for the purpose of determining their development potential In order to examine the reasons of unprofitable operation, firstly enterprises which reported net loss in 2014 were identified The possibility of determining the development potential is analyzed on the sample of five enterprises which reported above the average net loss in 2014, and which are characterized by conducting environmentally responsible business activities The focus of the research is on "green enterprises" because there is a need to improve the economic sustainability of green business The results of the research indicate that economic sustainability of environmentally responsible enterprises can be achieved by improving the real capacity utilization rate at current global price parity or by strengthening the global price parity at current real capacity utilization rate

Research on Quantitative Measurement and Feature Analysis of Industrial Overcapacity

Abstract: Based on the production function method, this paper examines Chinese industry under the different stages of Chinese economic development The study involves selected indicators of the gross value of industrial output, fixed capital stock, labor input, and energy input In addition, the panel data fixed effects model is used to measure the capacity utilization of Chinese industries, and analyze the main features of the excess capacity Finally, according to the research results, this paper puts forward some suggestions to solve the contradictions between overcapacity

A Dynamic Analysis of Demand and Productivity Growth in a Two-sector Kaleckian Model

Abstract: This study extends a two-sector Kaleckian model of growth and income distribution by incorporating the dynamics of labour productivity growth. The economy is composed of investment goods and consumption goods producing sectors, with the sectoral demand and productivity growth interaction dynamically formalized. The study analyses the conditions for the cyclical demand and productivity growth phenomena in a two-sector economy. The model reveals that each sector may present a different response in capacity utilization rate to a change in sectoral income distribution. These phenomena are specific to two-sector models, and cannot be observed with a conventional aggregate growth model.

Some Characteristics of the Decline in Manufacturing Capacity Utilization

Abstract: In this note, we provide several observations regarding trends in manufacturing capacity utilization rates using data from the Federal Reserve Board and the Census Bureau. The note does not aim to consider all potential explanations for the decline in utilization rates, and indeed we do not find a single root cause of the decline. We do, however, attempt to narrow the scope of potential explanations and contribute contemporary data to the existing commentary.