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Cyclical factor utilization

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  • Mark Bils
  • Jang-Ok Cho

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.

Suggested Citation

  • Mark Bils & Jang-Ok Cho, 1993. "Cyclical factor utilization," Discussion Paper / Institute for Empirical Macroeconomics 79, Federal Reserve Bank of Minneapolis.
    • Handle: RePEc:fip:fedmem:79
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    References listed on IDEAS

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