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The changing dynamics of short-run output adjustment

Korkut Alp Ertürk and Ivan Mendieta-Muñoz

MPRA Paper from University Library of Munich, Germany

Abstract: Much of macroeconomic theorizing rests on assumptions that define the short-run output adjustment of a mass-production economy. The demand effect of investment on output, assumed much faster than its supply effect, works through employment expanding pari passu with changes in capacity utilization while productivity remains constant. Using linear Structural VAR and Time-Varying Parameter Structural VAR models, we document important changes in the short-run output adjustment in the USA. The link between changes in employment, capacity utilization and investment has weakened, while productivity became more responsive following demand shifts caused by investment since the early 1990s.

Keywords: changes in short-run output adjustment; capacity utilization; employment; mass-production economy; post-Fordism. (search for similar items in EconPapers)
JEL-codes: B50 E10 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac and nep-pke
Date: 2018-06-05
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