An RBC–DSGE Model of the U.S. Economy with Electricity as a Production Input

An RBC–DSGE Model of the U.S. Economy with Electricity as a Production Input | Research Square window.SnipcartSettings = { analytics: { enabled: false } }; (function() { var accessVector = localStorage.getItem('access_vector') || ''; window.dataLayer = window.dataLayer || []; if (accessVector) { window.dataLayer.push({ user: { profile: { profileInfo: { snid: accessVector } } } }); } })(); (function(w,d,s,l,i){w[l]=w[l]||[];w[l].push({'gtm.start':new Date().getTime(),event:'gtm.js'});var f=d.getElementsByTagName(s)[0],j=d.createElement(s),dl=l!='dataLayer'?'&l='+l:'';j.async=true;j.src='https://www.googletagmanager.com/gtm.js?id='+i+dl;f.parentNode.insertBefore(j,f);})(window,document,'script','dataLayer','GTM-K279D39R'); Browse Preprints In Review Journals COVID-19 Preprints AJE Video Bytes Research Tools Research Promotion AJE Professional Editing AJE Rubriq About Preprint Platform In Review Editorial Policies Our Team Advisory Board Help Center Sign In Submit a Preprint Cite Share Download PDF Research Article An RBC–DSGE Model of the U.S. Economy with Electricity as a Production Input Bahram Adrangi, Maryam Amini, Saman Hatamerad, Kambiz Raffiee This is a preprint; it has not been peer reviewed by a journal. https://doi.org/ 10.21203/rs.3.rs-8818848/v1 This work is licensed under a CC BY 4.0 License Status: Posted Version 1 posted You are reading this latest preprint version Abstract This paper develops estimated and calibrated real business cycle (RBC) dynamic stochastic general equilibrium (DSGE) models of the U.S. economy in which electricity enters explicitly as a productive input alongside capital and labor. Using quarterly U.S. data spanning 1979Q1–2025Q3, the analysis evaluates how electricity supply-related shocks influence macroeconomic activity, business-cycle dynamics, and medium-term economic stability. By integrating electricity quantities and prices into the production structure, the model provides a framework for assessing the macroeconomic consequences of energy supply disruptions and infrastructure constraints. Empirical results indicate that the estimated model is internally consistent and empirically reliable, as reflected in statistically significant variance estimates, stable steady states, and well-behaved out-of-sample forecasts for key macroeconomic variables. Electricity-related dynamics are tightly linked to output, investment, and labor markets, underscoring electricity’s role as a complementary input rather than a passive cost factor. Impulse response analysis shows that shocks to electricity supply propagate through the economy in a manner similar to negative productivity shocks, generating persistent contractions in output, investment, and hours worked. While electricity’s steady-state cost share is relatively small, its importance in production amplifies short-run fluctuations and strengthens the transmission of real shocks. Comparisons between estimated and calibrated models reveal robust qualitative mechanisms, with differences in persistence and magnitude reflecting alternative assumptions about adjustment frictions and shock processes. From a policy perspective, the findings highlight the macroeconomic importance of electricity system reliability, grid investment, and energy supply resilience. Policies that affect electricity availability—whether through regulation, infrastructure investment, or climate-related transitions—can have economy-wide effects comparable to technology shocks. The results underscore the need for macroeconomic policy frameworks to explicitly account for electricity supply conditions when evaluating growth prospects, business-cycle stabilization, and the economic implications of the ongoing energy transition. Full Text Additional Declarations No competing interests reported. Cite Share Download PDF Status: Posted Version 1 posted You are reading this latest preprint version Research Square lets you share your work early, gain feedback from the community, and start making changes to your manuscript prior to peer review in a journal. As a division of Research Square Company, we’re committed to making research communication faster, fairer, and more useful. We do this by developing innovative software and high quality services for the global research community. Our growing team is made up of researchers and industry professionals working together to solve the most critical problems facing scientific publishing. Also discoverable on Platform About Our Team In Review Editorial Policies Advisory Board Help Center Resources Author Services Accessibility API Access RSS feed Manage Cookie Preferences © Research Square 2026 | ISSN 2693-5015 (online) Privacy Policy Terms of Service Do Not Sell My Personal Information {"props":{"pageProps":{"initialData":{"identity":"rs-8818848","acceptedTermsAndConditions":true,"allowDirectSubmit":true,"archivedVersions":[],"articleType":"Research Article","associatedPublications":[],"authors":[{"id":626808304,"identity":"df0f6710-d8a0-4d9f-a432-976c785fe487","order_by":0,"name":"Bahram Adrangi","email":"data:image/png;base64,iVBORw0KGgoAAAANSUhEUgAAAZAAAAAyAQMAAABI0h/eAAAABlBMVEX///8AAABVwtN+AAAACXBIWXMAAA7EAAAOxAGVKw4bAAAAuElEQVRIiWNgGAWjYFCCBBAhIQdm85CixZhkLQyJDURr4W/Pffi54JdF+obbDYwP3rYRoUXizHNj6Zl9Erkb7hxgNpxLjBaGG2kM0rw9QC03EtikeYnRIn8jjfk3UEu6wY0E9t9EaTG4kcYmzfNDIgGohY2ZKC2GZ56xWfM2SBjOvHOwWXLOOSK0yB1PY77N86dOnu9288EPb8qI0AIGjCD3SDA2EKseBP6AtJCiYRSMglEwCkYUAAAwuTWXhgQKmgAAAABJRU5ErkJggg==","orcid":"","institution":"University of Portland","correspondingAuthor":true,"prefix":"","firstName":"Bahram","middleName":"","lastName":"Adrangi","suffix":""},{"id":626808305,"identity":"d437f6d5-0176-4af8-b2d0-3cdb14ca10d8","order_by":1,"name":"Maryam Amini","email":"","orcid":"","institution":"University of Zanjan","correspondingAuthor":false,"prefix":"","firstName":"Maryam","middleName":"","lastName":"Amini","suffix":""},{"id":626808306,"identity":"24bec562-8648-4836-8a9c-29f7f9d6ab10","order_by":2,"name":"Saman Hatamerad","email":"","orcid":"","institution":"University of Zanjon","correspondingAuthor":false,"prefix":"","firstName":"Saman","middleName":"","lastName":"Hatamerad","suffix":""},{"id":626808307,"identity":"a27b3d7d-c547-43c3-8956-faafacf004ec","order_by":3,"name":"Kambiz Raffiee","email":"","orcid":"","institution":"University of Nevada, Reno","correspondingAuthor":false,"prefix":"","firstName":"Kambiz","middleName":"","lastName":"Raffiee","suffix":""}],"badges":[],"createdAt":"2026-02-08 03:23:14","currentVersionCode":1,"declarations":"","doi":"10.21203/rs.3.rs-8818848/v1","doiUrl":"https://doi.org/10.21203/rs.3.rs-8818848/v1","draftVersion":[],"editorialEvents":[],"editorialNote":"","failedWorkflow":false,"files":[{"id":107547285,"identity":"fa5da183-f032-4465-b42d-796eadc6206b","added_by":"auto","created_at":"2026-04-22 13:27:38","extension":"pdf","order_by":1,"title":"","display":"","copyAsset":false,"role":"manuscript-pdf","size":678160,"visible":true,"origin":"","legend":"","description":"","filename":"mainpap.pdf","url":"https://assets-eu.researchsquare.com/files/rs-8818848/v1_covered_d742d072-6a8d-4bb6-98db-3fe03c097425.pdf"}],"financialInterests":"No competing interests reported.","formattedTitle":"An RBC–DSGE Model of the U.S. Economy with Electricity as a Production Input","fulltext":[],"fulltextSource":"","fullText":"","funders":[],"hasAdminPriorityOnWorkflow":false,"hasManuscriptDocX":false,"hasOptedInToPreprint":true,"hasPassedJournalQc":"","hasAnyPriority":false,"hideJournal":true,"highlight":"","institution":"","isAcceptedByJournal":false,"isAuthorSuppliedPdf":true,"isDeskRejected":"","isHiddenFromSearch":false,"isInQc":false,"isInWorkflow":false,"isPdf":true,"isPdfUpToDate":true,"isWithdrawnOrRetracted":false,"journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true},"keywords":"","lastPublishedDoi":"10.21203/rs.3.rs-8818848/v1","lastPublishedDoiUrl":"https://doi.org/10.21203/rs.3.rs-8818848/v1","license":{"name":"CC BY 4.0","url":"https://creativecommons.org/licenses/by/4.0/"},"manuscriptAbstract":"\u003cp\u003eThis paper develops estimated and calibrated real business cycle (RBC) dynamic stochastic general equilibrium (DSGE) models of the U.S. economy in which electricity enters explicitly as a productive input alongside capital and labor. Using quarterly U.S. data spanning 1979Q1–2025Q3, the analysis evaluates how electricity supply-related shocks influence macroeconomic activity, business-cycle dynamics, and medium-term economic stability. By integrating electricity quantities and prices into the production structure, the model provides a framework for assessing the macroeconomic consequences of energy supply disruptions and infrastructure constraints.\u003c/p\u003e\n\u003cp\u003eEmpirical results indicate that the estimated model is internally consistent and empirically reliable, as reflected in statistically significant variance estimates, stable steady states, and well-behaved out-of-sample forecasts for key macroeconomic variables. Electricity-related dynamics are tightly linked to output, investment, and labor markets, underscoring electricity’s role as a complementary input rather than a passive cost factor.\u003c/p\u003e\n\u003cp\u003eImpulse response analysis shows that shocks to electricity supply propagate through the economy in a manner similar to negative productivity shocks, generating persistent contractions in output, investment, and hours worked. While electricity’s steady-state cost share is relatively small, its importance in production amplifies short-run fluctuations and strengthens the transmission of real shocks. Comparisons between estimated and calibrated models reveal robust qualitative mechanisms, with differences in persistence and magnitude reflecting alternative assumptions about adjustment frictions and shock processes.\u003c/p\u003e\n\u003cp\u003eFrom a policy perspective, the findings highlight the macroeconomic importance of electricity system reliability, grid investment, and energy supply resilience. Policies that affect electricity availability—whether through regulation, infrastructure investment, or climate-related transitions—can have economy-wide effects comparable to technology shocks. The results underscore the need for macroeconomic policy frameworks to explicitly account for electricity supply conditions when evaluating growth prospects, business-cycle stabilization, and the economic implications of the ongoing energy transition.\u003c/p\u003e","manuscriptTitle":"An RBC–DSGE Model of the U.S. Economy with Electricity as a Production Input","msid":"","msnumber":"","nonDraftVersions":[{"code":1,"date":"2026-04-22 13:27:01","doi":"10.21203/rs.3.rs-8818848/v1","editorialEvents":[{"type":"communityComments","content":0}],"status":"published","journal":{"display":true,"email":"[email protected]","identity":"researchsquare","isNatureJournal":false,"hasQc":true,"allowDirectSubmit":true,"externalIdentity":"","sideBox":"","snPcode":"","submissionUrl":"/submission","title":"Research Square","twitterHandle":"researchsquare","acdcEnabled":true,"dfaEnabled":false,"editorialSystem":"","reportingPortfolio":"","inReviewEnabled":false,"inReviewRevisionsEnabled":true}}],"origin":"","ownerIdentity":"14bb8bd6-f7b7-498a-9903-ffa742f093d6","owner":[],"postedDate":"April 22nd, 2026","published":true,"recentEditorialEvents":[],"rejectedJournal":[],"revision":"","amendment":"","status":"posted","subjectAreas":[],"tags":[],"updatedAt":"2026-04-22T13:27:01+00:00","versionOfRecord":[],"versionCreatedAt":"2026-04-22 13:27:01","video":"","vorDoi":"","vorDoiUrl":"","workflowStages":[]},"version":"v1","identity":"rs-8818848","journalConfig":"researchsquare"},"__N_SSP":true},"page":"/article/[identity]/[[...version]]","query":{"redirect":"/article/rs-8818848","identity":"rs-8818848","version":["v1"]},"buildId":"XKTyCvWXoU3ODBz1xrDgd","isFallback":false,"isExperimentalCompile":false,"dynamicIds":[84888],"gssp":true,"scriptLoader":[]}