The impact of active aggregate demand on utilisation-adjusted TFP

Arbeitspapier

Non-clearing goods markets are an important driver of capacity utilisation and total factor productivity (TFP). The trade-off between goods prices and household search effort is central to goods market matching and therefore drives TFP over the business cycle. In this paper, I develop a New-Keynesian DSGE model with capital utilisation, worker effort, and expand it with goods market search-and-matching (SaM) to model non-clearing goods markets. I conduct a horse-race between the different capacity utilisation channels using Bayesian estimation and capacity utilisation survey data. Models that include goods market SaM improve the data fit, while the capital utilisation and worker effort channels are rendered less important compared to the literature. It follows that TFP fluctuations increase for demand and goods market mismatch shocks, while they decrease for technology shocks. This pattern increases as goods market frictions increase and as prices become stickier. The paper shows the importance of non-clearing goods markets in explaining the difference between technology and TFP over the business cycle.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: IWH Discussion Papers ; No. 9/2022

Classification and Topics

• Classification: Wirtschaft ; Investment; Capital; Intangible Capital; Capacity ; Macroeconomics: Production ; Demand and Supply of Labor: General
• Subject: Bayesian estimation ; capacity utilisation ; non-clearing goods markets ; search-and-matching ; total factor productivity

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Gantert, Konstantin
• Event: Veröffentlichung
• (who): Halle Institute for Economic Research (IWH)
• (where): Halle (Saale)
• (when): 2022

Further information

• Handle: http://hdl.handle.net/10419/251586
• URN: urn:nbn:de:gbv:3:2-866060
• Last update: 10.03.2025, 11:41 AM CET