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A contribution to estimate a benchmark capital stock. An optimal consistency method

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  • J. M. Albala-Bertrand

Abstract

There are alternative methods of estimating capital stock for a benchmark year. However, these methods are costly and time-consuming, requiring the gathering of much basic information as well as the use of some convenient assumptions and guesses. In addition, a way is needed of checking whether the estimated benchmark is at the correct level. This paper proposes an optimal consistency method (OCM), which enables a capital stock to be estimated for a benchmark year, and which can also be used in checking the consistency of alternative estimates. This method, in contrast to most current approaches, pays due regards both to potential output and to the productivity of capital. It is applied to 45 cases for nine OECD countries and six Latin American ones. It works reasonably well, and it requires only small amounts of data, which are readily available. It appears to exhibit similar accuracy to alternative methods, but it is virtually inexpensive in both time and funding.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/02692171.2010.512128
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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

Volume (Year): 24 (2010)
Issue (Month): 6 ()
Pages: 715-729

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Handle: RePEc:taf:irapec:v:24:y:2010:i:6:p:715-729

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Related research

Keywords: benchmark capital; perpetual inventory method (PIM); potential output; capital productivity; optimal consistency method (OCM);

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Cited by:
  1. Jose Miguel Albala-Bertrand, 2013. "Evolution of Structural Indicators. China and Regions: 1981-2010," Working Papers 701, Queen Mary, University of London, School of Economics and Finance.
  2. Thomas M. Fullerton Jr & Azucena González Monzón & Adam G. Walke, 2013. "Physical Infrastructure and Economic Growth in El Paso," Economic Development Quarterly, , vol. 27(4), pages 363-373, November.

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