ABSTRACT
The physical capital stock in place is relatively fixed over short periods of time, so changes in the price of energy might not be thought to cause substantial changes in the use of capital inputs in production. In this view, changes in capital inputs did not contribute to the imme diate decline in output after the two oil price shocks. This view would be incorrect, however, if an increase in the price of energy causes a decrease in the utilization of energy-inefficient vintages of the capital stock, and thereby a reduction in the flow of capital services used in production. The flow of capital services rather than the available phys ical capital is the appropriate measure of capital inputs in production.
