Capacity Utilization and the Dynamics of Business Cycle Fluctuations
AbstractWe perform an empirical evaluation of the role of capacity utilization in business cycle fluctuations. We first document the relation between capacity utilization and business cycle fluctuations in historical data and then verify whether these empirical features can be explained by a dynamic general equilibrium environment with variable rates of capacity utilization and realistic stochastic processes for the model's forcing variables. In this evaluation, we use two measures of the business cycle: output growth and the cyclical component of output. We find that, for both historical data and our theoretical economy, capacity utilization is procyclical, a coincident indicator of the cyclical component of output, but a lagging indicator of the growth rate of output. We also find that capacity utilization is much more correlated with the cyclical component of output than with output growth. Nous entreprenons une évaluation empirique du rôle de l'utilisation de la capacité dans les fluctuations économiques. Nous commençons par documenter la relation entre l'utilisation de la capacité et les fluctuations dans les données historiques puis vérifions si ces régularités empiriques peuvent être expliquées par un modèle d'équilibre général avec des taux de capacité d'utilisation variables et des processus stochastiques réalistes pour les variables exogènes. Dans cette évaluation, nous utilisons deux mesures du cycle: la croissance de la production et la composante cyclique de la production. Nous trouvons que, tant pour les données historiques que notre modèle, l'utilisation de la capacité est procyclique, est un indicateur coïncident de la production, mais un indicateur retardé du taux de croissance de la production. Nous trouvons également que l'utilisation de la capacité est beaucoup plus corrélée avec les composantes cycliques qu'avec le taux de croissance.
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Bibliographic InfoPaper provided by CREFE, Université du Québec à Montréal in its series Cahiers de recherche CREFE / CREFE Working Papers with number 92.
Length: 38 pages
Date of creation: Sep 1999
Date of revision:
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More information through EDIRC
Real business cycles; trend-cycle decomposition; business cycle indicators;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-10-04 (All new papers)
- NEP-DGE-1999-10-04 (Dynamic General Equilibrium)
- NEP-HIS-1999-10-04 (Business, Economic & Financial History)
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