Working Paper : 1326


Authors Albonico, A., Kalyvitis, S. and Pappa, E.
Title Capital Maintenance and Depreciation over the Business Cycle
Abstract This paper develops and estimates a stochastic general equilibrium model with capital maintenance, which affects endogenously the depreciation rate of capital. The estimate of maintenance series is found to track survey-based measures for Canada quite closely and to generate the procyclical pattern of maintenance observed in the data. We use it to infer the time profile of equipment capital depreciation in Canadian and US manufacturing. Contrary to existing estimates, the depreciation rate is estimated to be volatile and highly procyclical over that last 50 years in both countries.
Keywords real business cycle, endogenous capital depreciation, maintenance
Classification JEL E22, E32, E37
File Maint_Depr_5apr2013_sarantis.pdf (310742 bytes)
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