Energy use is inelastic in time-series data, but elastic in international cross-section data. Two models of energy use reproduce these elasticities: a putty-putty model with adjustment costs developed by Pindyck and Rotemberg (1983) and a putty-clay model. In the Pindyck-Rotemberg model, capital...

We evaluate the ability of models with putty-clay capital and stochastic energy prices to account for the dynamics of energy use and output. Economists have noted a close relationship between changes in the price of energy and changes in output. Moreover, they have documents that this...