Dear Johannes,
Could I model variable capital capacity as a state variable and attach a capital utilization shock to it? My purpose is to model endogenous capital utilization (capital capacity state) and exogenous capital utilization shock at the same time.
And if I can model both of endogenous capital capacity and exogenous capital utilization shock, can I link observable capital utilization rate as an observable variable/measurement for endogenous capital capacity sate?
Thank you very much and look forward to hearing from you.
Best regards,
Jesse
PhD Candidate
I am not sure how you would do that, unless you say that households decide today about the desired capital utilization next period. Then when that next period comes, there is an exogenous shock affecting that utilization. Otherwise, agents would immediately undo the shock.