Capital maintenance and depreciation over the business cycle

Alice Albonico; Sarantis Kalyvitis; Evi Pappa

doi:https://doi.org/10.1016/j.jedc.2013.12.008

Capital maintenance and depreciation over the business cycle

Alice Albonico, Sarantis Kalyvitis, Evi Pappa

Research output: Contribution to journal › Article › Research › peer-review

12 Citations (Scopus)

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 our model estimates to infer the time profile of equipment capital depreciation in Canadian and US manufacturing. The depreciation rate is estimated to be volatile and highly procyclical in both countries. © 2013 Elsevier B.V.

Original language	English
Pages (from-to)	273-286
Journal	Journal of Economic Dynamics and Control
Volume	39
DOIs	https://doi.org/10.1016/j.jedc.2013.12.008
Publication status	Published - 1 Feb 2014

Keywords

Endogenous capital depreciation
Maintenance
Real business cycle

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AB - 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 our model estimates to infer the time profile of equipment capital depreciation in Canadian and US manufacturing. The depreciation rate is estimated to be volatile and highly procyclical in both countries. © 2013 Elsevier B.V.

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KW - Real business cycle

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JO - Journal of Economic Dynamics and Control

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