Factor-Hoarding and the Propagation of Business-Cycle Shocks
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This paper analyzes the role of variable capital-utilization rates in propagating shocks over the business cycle. The model on which our analysis is based treats variable capital-utilization rates as a form of factor-hoarding. We argue that variable capital-utilization rates are a quantitatively important source of propagation to business-cycle shocks. With this additional source of propagation, the volatility of exogenous technology shocks needed to explain the observed variability in aggregate U.S. output is significantly reduced relative to standard real-business-cycle models.
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Mary Grace Wilson Distinguished Professor
Burnside’s fields of specialization include macroeconomics and international finance. His recent research focuses on foreign exchange markets, empirical methods in finance, and the behavior of prices in housing markets. He has published articles in a number of academic journals, including the American Economic Review, the Journal of Political Economy, the Review of Economic Studies, and the Review of Financial Studies. He is a Research Associate of the National Bure