Can capacity constraints explain asymmetries
AbstractIn this paper, we investigate the ability of a modified RBC model to reproduce asymmetries observed for macroeconomic variables over the business cycle. In order to replicate the empirical skewness of major U.S. macroeconomic variables, we introduce a capacity constraint into an otherwise prototypical RBC model. This constraint emerges due to the assumption of kinked marginal costs of utilization, where the kink is located at a utilization rate of 100 percent. We find that a model with a suitably calibrated cost function reproduces the empirical coefficients of skewness remarkably well. --
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Bibliographic InfoPaper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2008,01.
Date of creation: 2008
Date of revision:
Capacity utilization; capacity constraints; asymmetry; RBC model;
Find related papers by JEL classification:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-25 (All new papers)
- NEP-CBA-2008-03-25 (Central Banking)
- NEP-DGE-2008-03-25 (Dynamic General Equilibrium)
- NEP-MAC-2008-03-25 (Macroeconomics)
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