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Capacity utilization and the effects of energy price increases in Japan

Capacity utilization and the effects of energy price increases in Japan Abstract It is well known that the standard real business cycle (RBC) model with energy cannot generate the large drops in value added following the energy price increases in the 1970s, although previous empirical studies have confirmed the important role of energy prices. In this paper, endogenous capacity utilization is incorporated into an otherwise standard RBC model as an amplification mechanism. The simulated results show that the endogenous capacity utilization successfully generates the large contraction in value added observed in the Japanese data. It is also shown that the introduction of capacity utilization produces more realistic dynamics of total factor productivity. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The B.E. Journal of Macroeconomics de Gruyter

Capacity utilization and the effects of energy price increases in Japan

Niizeki, Takeshi
The B.E. Journal of Macroeconomics , Volume 14 (1) – Jan 1, 2014
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Publisher
de Gruyter
Copyright
Copyright © 2014 by the
ISSN
2194-6116
eISSN
1935-1690
DOI
10.1515/bejm-2013-0119
Publisher site
See Article on Publisher Site

Abstract

Abstract It is well known that the standard real business cycle (RBC) model with energy cannot generate the large drops in value added following the energy price increases in the 1970s, although previous empirical studies have confirmed the important role of energy prices. In this paper, endogenous capacity utilization is incorporated into an otherwise standard RBC model as an amplification mechanism. The simulated results show that the endogenous capacity utilization successfully generates the large contraction in value added observed in the Japanese data. It is also shown that the introduction of capacity utilization produces more realistic dynamics of total factor productivity.

Journal

The B.E. Journal of Macroeconomics – de Gruyter

Published: Jan 1, 2014

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    Hooker
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    Newell
  • Oil Prices and the Terms of Trade of
    Backus
  • Oil and the Macroeconomy since World War II of
    Hamilton
  • The Depressing Effect of Agricultural Institutions on the Prewar of
    Hayashi
  • Eichenbaum Factor - Hoarding and the Propagation of Cycle Shocks
    Burnside
  • What Happened to the Oil Price - Macroeconomy Relationship of
    Hooker
  • Neoclassical of the Postwar The of Contributions Article
    Otsu
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    Hayashi
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    Hooker
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    Blanchard
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