Capacity Utilization

Carol Corrado and Joe Mattey

Journal of Economic Perspectives, 1997, vol. 11, issue 1, 151-167

Abstract: This article reviews how the Federal Reserve measures capacity utilization and explains why capacity utilization has been, and likely will remain, a useful indicator of inflationary pressures and business cycle fluctuations. The authors also explain why economic developments, such as the pace of technological change, increased international trade, and a shift in the share of the workforce to service-producing industries, have not substantially affected the indicator value of capacity utilization. A microtheoretic description of the concept of capacity utilization is offered. Evidence on the plausibility of microeconomic structural interpretations of the relation between capacity utilization and price changes is reviewed.

JEL-codes: E22 (search for similar items in EconPapers)
Date: 1997
Note: DOI: 10.1257/jep.11.1.151
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Citations: View citations in EconPapers (105)

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