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Measuring Irish Capital

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  • Mary J. Keeney

    (Central Bank and Financial Services Authority of Ireland)

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    Abstract

    Irish National Income and Expenditure Accounts do not contain information on capital stocks or capital services estimation. Estimates of the national capital stock and the depreciation of its fixed assets are basic macroeconomic aggregates and are integral components for many modelling exercises. This paper presents a detailed asset-level analysis of the stocks and depreciation of Irish fixed assets and the capital formation flows used to derive them. It applies an improved perpetual inventory methodology for calculating depreciation based on best practice employed for the US National Income and Product Accounts (NIPA). The paper shows how the three basic capital variables – the net capital stock, consumption of fixed capital and capital services – are linked through a standard equation for the value of an asset. The paper then presents estimates of the volume of capital services for the Irish economy as well as by asset type. The volume index of capital services (VICS) weights together the growth in the net stock of assets using shares that reflect the relative productivity of the different assets that make up the capital stock i.e. without controlling for the share of housing in the capital stock, total factor productivity will be overestimated for growth accounting purposes.

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    File URL: http://www.esr.ie/Vol38_1/keeney.pdf
    File Function: First version, 2007
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    Bibliographic Info

    Article provided by Economic and Social Studies in its journal Economic and Social Review.

    Volume (Year): 38 (2007)
    Issue (Month): 1 ()
    Pages: 25-62

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    Handle: RePEc:eso:journl:v:38:y:2007:i:1:p:25-62

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    Web page: http://www.esr.ie

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    1. Dale W. Jorgenson & Kevin J. Stiroh, 2000. "Raising the Speed Limit: US Economic Growth in the Information Age," OECD Economics Department Working Papers 261, OECD Publishing.
    2. Jorgenson, D.W., 1994. "Empirical Studies of Depriciation," Harvard Institute of Economic Research Working Papers 1704, Harvard - Institute of Economic Research.
    3. Randy A. Nelson & Michael R. Caputo, 2000. "Price Changes, Maintenance, And The Rate Of Depreciation," The Review of Economics and Statistics, MIT Press, vol. 79(3), pages 422-430, August.
    4. Ball, V Eldon, et al, 1993. "The Stock of Capital in European Community Agriculture," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 20(4), pages 437-50.
    5. Hulten, Charles R, 1992. "Growth Accounting When Technical Change Is Embodied in Capital," American Economic Review, American Economic Association, vol. 82(4), pages 964-80, September.
    6. de la Fuente, Angel & Doménech, Rafael, 2002. "Human Capital in Growth Regressions: How Much Difference Does Data Quality Make? An Update and Further Results," CEPR Discussion Papers 3587, C.E.P.R. Discussion Papers.
    7. repec:sae:niesru:v:147:y::i:1:p:84-96 is not listed on IDEAS
    8. Mas, Matilde & Perez, Francisco & Uriel, Ezequiel, 2000. "Estimation of the Stock of Capital in Spain," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 46(1), pages 103-16, March.
    9. José Hernández & Ignacio Mauleón, 2005. "Econometric estimation of a variable rate of depreciation of the capital stock," Empirical Economics, Springer, vol. 30(3), pages 575-595, October.
    10. Triplett, Jack E, 1996. "Depreciation in Production Analysis and in Income and Wealth Accounts: Resolution of an Old Debate," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 93-115, January.
    11. Honohan, P., 1992. "Intersectoral Financial Flows in Ireland," Research Series, Economic and Social Research Institute (ESRI), number GRS158.
    12. Diewert, W Erwin, 1978. "Superlative Index Numbers and Consistency in Aggregation," Econometrica, Econometric Society, vol. 46(4), pages 883-900, July.
    13. Charles R. Hulten, 1992. "Growth Accounting When Technical Change is Embodied in Capital," NBER Working Papers 3971, National Bureau of Economic Research, Inc.
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    Cited by:
    1. Mary J. Keeney, 2010. "A Quality Adjusted Measure of Labour Services for Ireland," The Economic and Social Review, Economic and Social Studies, vol. 41(2), pages 149-172.

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