A note on capacity utilization,productivity, and the Canadian output gap

This study revises estimates of real Canadian potential output and the real GNP gap by applying a method of directly estimating the actual and potential factor utilization rates to quarterly Canadian data. The empirical results indicate that capital utilization varies just under twice as much as labour use over the cycle. The results also suggest that labour productivity will vary procyclically, with the elasticity of productivity with respect to the employment rate estimated to be 1.42.