Can capacity constraints explain asymmetries
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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| Date of creation: | 2008 |
| Handle: | RePEc:zbw:bubdp1:7036 |
| Contact details of provider: | Postal: Postfach 10 06 02, 60006 Frankfurt Phone: 0 69 / 95 66 - 0 Fax: 0 69 / 95 66 30 77 Web page: http://www.bundesbank.de/ Email: More information through EDIRC
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