Discussion Paper

Cyclical factor utilization

Abstract: We introduce procyclical labor and capital utilization, as well as costs of rapidly increasing employment, into a business-cycle model. Plausible variations in factor utilization enable us to explain observed variability of real GNP with considerably smaller economy-wide disturbances. The costs of adjustment create very interesting and realistic lead and lag relationships: Employment does not peak until a full quarter after output; workweeks, effort, capital utilization, and productivity all sharply lead the business cycle.

Keywords: Business cycles;

Bibliographic Information

Provider: Federal Reserve Bank of Minneapolis

Part of Series: Discussion Paper / Institute for Empirical Macroeconomics

Publication Date: 1993

Number: 79