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Can capacity constraints explain asymmetries

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  • Knüppel, Malte

Abstract

In 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 Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2008,01.

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Date of creation: 2008
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Handle: RePEc:zbw:bubdp1:7036

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Keywords: Capacity utilization; capacity constraints; asymmetry; RBC model;

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