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On the ‘utilisation controversy’: a comment

Author

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  • Santiago José Gahn
  • Alejandro González

Abstract

In a recent contribution, Nikiforos (Nikiforos, M. 2016. On the utilisation controversy: a theoretical and empirical discussion of the Kaleckian model of growth and distribution, Cambridge Journal of Economics, vol. 40, no. 2, 437–67) has claimed that the FED data on capacity utilisation are stationary by construction, and thus, not suitable to test the Neo-Kaleckian model. He then proceeds to provide new series on capital utilisation, which he claims are non-stationary and provide, supposedly, support for the Neo-Kaleckian model. This comment presents two interrelated claims. First, the measurement error that Nikiforos claims to be I(1) in the FED series is I(0), and what is measured with error is only the level of the series. Thus, this series is suitable to test the Neo-Kaleckian model. Secondly, he does not provide unit root tests for the series he suggests as superior to the FED. When this exercise is carried out, almost all unit root tests decidedly reject the existence of a stochastic trend on his three proposed series, which, according to the author, do not lend support to the Neo-Kaleckian model. We conclude that measures of capacity utilisation based on FRB data are a reasonable source to test the implications of a wide variety of macroeconomic models.

Suggested Citation

  • Santiago José Gahn & Alejandro González, 2020. "On the ‘utilisation controversy’: a comment," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 44(3), pages 703-707.
    • Handle: RePEc:oup:cambje:v:44:y:2020:i:3:p:703-707.
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    File URL: http://hdl.handle.net/10.1093/cje/bez056
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    Cited by:

    1. de Oliveira, Guilherme, 2023. "On the utilization controversy in the demand-led growth literature: A quantile unit root approach," Economic Modelling, Elsevier, vol. 126(C).

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    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E11 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Marxian; Sraffian; Kaleckian

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