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| Author: | Gilchrist, S. |
| Title: | Putty-clay and investment: a business cycle analysis |
| Journal: | Journal of Political Economy
2000 : OCT, VOL. 108:5, p. 928-960 |
| Index terms: | INVESTMENT BUSINESS CYCLES EQUILIBRIUM THEORY |
| Language: | eng |
| Abstract: | This paper develops a general equilibrium model with putty-clay technology, investment irreversibility, and variable capacity utilization. Low short-run capital-labour substitutability induces the putty-clay effect of a tight link between changes in capacity and movements in employment and output. Permanent shocks to technology or factor prices generate a hump-shaped response of hours, persistence in output growth, and positive comovement in the forecastable components of output and hours. |
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