Factor Hoarding and the Propagation of Business Cycles Shocks

Craig Burnside, Martin Eichenbaum

NBER Working Paper No. 4675*
Issued in March 1994
NBER Program(s):   EFG

---- Abstract -----

This paper analyzes the role of variable capital utilization rates in propagating shocks over the business cycle. To this end we formulate and estimate an equilibrium business cycle model in which cyclical capital utilization rates are viewed as a form of factor hoarding. We find that variable capital utilization rates substantially magnify and propagate the impact of shocks to agents' environments. The strength of these propagation effects is evident in the dynamic response functions of various economy wide aggregates to shocks in agents' environments, in the statistics that we construct to summarize the strength of the propagation mechanisms in the model and in the volatility of exogenous technology shocks needed to explain the observed variability in aggregate U.S. output. Other authors have argued that standard Real Business Cycle (RBC) models fail to account for certain features of the data because they do not embody quantitatively important propagation mechanisms. These features include the observed positive serial correlation in the growth rate of output, the shape of the spectrum of the growth rate of real output and the correlation between the forecastable component of real output and various other economic aggregates. Allowing for variable capital utilization rates substantially improves the ability of the model to account for these features of the data.

*Published: American Economic Review, December,1996.

Would you like an annual subscription to NBER Working Papers? Click here for more information.

You may purchase this paper on-line in .pdf format from SSRN.com ($5) for electronic delivery.
Information for subscribers and others expecting no-cost downloads

Machine-readable bibliographic record - MARC, RIS, BibTeX

 

 
Publications:
Main Publications Page
 
New This Week
Working Papers
Books              
Books in Progress
Older Books Online
Digest            
Reporter            
Bulletin on Aging & Health
Historical Bulletins
Free Subscriptions
Paid Subscriptions
 
Research:
Program descriptions and members
Working Group Descriptions and Papers
Meetings 

Selected Projects:
Conference on Research in Income and Wealth
Conference on Econometrics and Mathematical Economics
Sloan Science and Engineering Workforce Project
Boston Census Research Data Center
 
Call for Papers
Submit to WP Series             
 
Data:
NBER Collection
Business Cycle Dates
Latest Business Cycle Memo
New Economic Releases
Selected Sources
Current Population Survey
Economic Organizations
US Government Agencies
Other Data Collections

Economic Report of the President
Economic Indicators
Congressional Budget Office
OECD Frequently Requested Statistics
 
About
What is the NBER?
NBER Historical Archives
Non-data Links    
Search              
Help              
Contact us
Site Map
Employment              
Fellowships
 
People:
Staff
Researchers
Board
Contact Us
Search
 
Search via Google: