Capital maintenance and depreciation over the business cycle

Alice Albonico, Sarantis Kalyvitis, Evi Pappa

    Research output: Contribution to journalArticleResearchpeer-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 languageEnglish
    Pages (from-to)273-286
    JournalJournal of Economic Dynamics and Control
    Volume39
    DOIs
    Publication statusPublished - 1 Feb 2014

    Keywords

    • Endogenous capital depreciation
    • Maintenance
    • Real business cycle

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