Does a Survey Based Capacity Utilization Measure Help Predicting Brazilian Output Gap in Real-Time?

Abstract The aim of the paper is to assess the informational content of a survey-based measure of the Brazilian manufacturing capacity utilization rate produced by the Brazilian Institute of Economics from Getulio Vargas Foundation. From a theoretical point of view, the survey-based capacity measure should provide meaningful information with respect to the Brazilian business cycle. In this work, we choose to use the output gap as the most comprehensive and convincing proxy of the cyclical situation (Graff and Sturm in CESifo Econ Stud 58(1):220–251, 2012). More specifically, we will refer to a real-time version of the output gap, using an existing real-time GDP data set produced by the Central Bank of Brazil (Cusinato et al. in Empir Econ, 2012). The information efficiency of the real-time output gap estimates is tested checking whether survey data can help producing real-time estimates that are significantly closer to the latest releases. In this sense, the paper provides a significant contribution to the existing literature, extending analysis already available for OECD countries to the Brazilian economy. Our main result is that survey data can indeed help to produce more efficient estimates of the output gap in real time.