Post Keynesian macrodynamic models make various assumptions about the normal rate of capacity utilization. Those rooted … variable that is endogenous to the actual rate of capacity utilization. This paper contributes to the debate about the normal … rate of capacity utilization by developing a model of strong or genuine hysteresis, in which firms make discrete decisions …

Using quarterly micro data on capacity utilization among Swedish manufacturing firms, we show that idiosyncratic … factors are much more important than aggregate influences in explaining variation in capacity utilization across firms and … that higher demand uncertainty lowers capacity utilization, especially for high-markup firms. We test these predictions …