Abstract
ABSTRACT In this article I analyse a declining trend in effective capacity utilisation in the United States, using the output–capital ratio from the NBER-CES database as a proxy for effective capacity utilisation. After identifying determinants of normal capacity utilisation in the literature, I find that this declining trend in the FRB’s capacity utilisation has also been present in the output–capital ratio of the NBER-CES sectoral database since 1958. Results suggest that relatively persistent technical (K/L), distribution (W/Y) and output changes have transitory effects on the output–capital ratio, my proxy for effective capacity utilisation.
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