| Authors |
Angelopoulou, E. and Kalyvitis, S. |
| Title |
Estimating the Euler Equation for Aggregate Investment with Endogenous Capital Depreciation |
| Abstract |
This paper looks at the empirical consequences of introducing endogenous capital depreciation in the standard neoclassical model with quadratic adjustment costs. To this end, we formulate an empirical specification that accommodates capital maintenance and utilization in the Euler equations for aggregate investment. The empirical estimates with data from the Canadian survey on Capital and Repair Expenditures show that, in contrast to the existing literature, the performance of the Euler equations is improved when we account for the impact of variable capital depreciation. |
| Creation Date |
2011-02-02 |
| Publication Status |
Forthcoming in Southern Economic Journal |
| Keywords |
Euler equation; endogenous depreciation; maintenance expenditures |
| Classification JEL |
D92; E22 |
| File |
Angelopoulou_Kalyvitis_wp.pdf (284085 bytes) |
| File-Function |
First version |
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