IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this article

Capital maintenance and depreciation over the business cycle

  • Albonico, Alice
  • Kalyvitis, Sarantis
  • Pappa, Evi

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Article provided by Elsevier in its journal Journal of Economic Dynamics and Control.

Volume (Year): 39 (2014)
Issue (Month): C ()
Pages: 273-286

in new window

Handle: RePEc:eee:dyncon:v:39:y:2014:i:c:p:273-286
DOI: 10.1016/j.jedc.2013.12.008
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Karl Whelan & Stacey Tevlin, 2000. "Explaining the investment boom of the 1990s," Open Access publications 10197/245, School of Economics, University College Dublin.
  2. Jorgenson, Dale W, 1996. "Empirical Studies of Depreciation," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 24-42, January.
  3. Mark E. Doms & Wendy E. Dunn & Stephen D. Oliner & Daniel E. Sichel, 2004. "How Fast Do Personal Computers Depreciate? Concepts and New Estimates," NBER Working Papers 10521, National Bureau of Economic Research, Inc.
  4. Michiel Evers & Ruud Mooij & Daniel Vuuren, 2008. "The Wage Elasticity of Labour Supply: A Synthesis of Empirical Estimates," De Economist, Springer, vol. 156(1), pages 25-43, March.
  5. Richard Schmalensee, 1974. "Market Structure, Durability, and Maintenance Effort," Review of Economic Studies, Oxford University Press, vol. 41(2), pages 277-287.
  6. Susanto Basu & Miles S. Kimball, 1997. "Cyclical Productivity with Unobserved Input Variation," NBER Working Papers 5915, National Bureau of Economic Research, Inc.
  7. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1998. "The Role of Investment-Specific Technological Change in the Business Cycle," RCER Working Papers 449, University of Rochester - Center for Economic Research (RCER).
  8. Fransesco Furlanetto & Martin Seneca, 2010. "New Perspectives on Depreciation Shocks as a Source of Business Cycle Fluctuations," Economics wp48, Department of Economics, Central bank of Iceland.
  9. Zheng Liu & Daniel F. Waggoner & Tao Zha, 2011. "Sources of macroeconomic fluctuations: A regime‐switching DSGE approach," Quantitative Economics, Econometric Society, vol. 2(2), pages 251-301, 07.
  10. Michael J. Geske & Valerie A. Ramey & Matthew D. Shapiro, 2007. "Why Do Computers Depreciate?," NBER Chapters, in: Hard-to-Measure Goods and Services: Essays in Honor of Zvi Griliches, pages 121-150 National Bureau of Economic Research, Inc.
  11. Katharine S. Neiss & Evi Pappa, 2005. "Persistence without too much price stickiness: the role of variable factor utilization," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 8(1), pages 231-255, January.
  12. Casares, Miguel & McCallum, Bennett T., 2006. "An optimizing IS-LM framework with endogenous investment," Journal of Macroeconomics, Elsevier, vol. 28(4), pages 621-644, December.
  13. BOUCEKKINE, Raouf & DEL RIO, Fernando & MARTINEZ, Blanca, . "Technological progress, obsolescence, and depreciation," CORE Discussion Papers RP 2116, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  14. Raouf BOUCEKKINE & Giorgio FABBRI & Fausto GOZZI, 2009. "Maintenance and investment : Complements or Substitutes ? A Reappraisal," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2009010, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  15. Schworm, William E., 1979. "Tax policy, capital use, and investment incentives," Journal of Public Economics, Elsevier, vol. 12(2), pages 191-204, October.
  16. M. Ishaq Nadiri & Ingmar R. Prucha, 1993. "Estimation of the Depreciation Rate of Physical and R&D Capital in the U.S. Total Manufacturing Sector," NBER Working Papers 4591, National Bureau of Economic Research, Inc.
  17. Feldstein, Martin S & Foot, David K, 1971. "The Other Half of Gross Investment: Replacement and Modernization Expenditures," The Review of Economics and Statistics, MIT Press, vol. 53(1), pages 49-58, February.
  18. Craig Burnside & Martin Eichenbaum, 1994. "Factor Hoarding and the Propagation of Business Cycles Shocks," NBER Working Papers 4675, National Bureau of Economic Research, Inc.
  19. Greenwood, J. & Hercowitz, Z. & Krusell, P., 1996. "Long-Run Implications of Investment-Specific Technological Change," RCER Working Papers 420, University of Rochester - Center for Economic Research (RCER).
  20. Prucha, Ingmar R. & Nadiri, M. Ishaq, 1991. "Endogenous Capital Utilization and Productivity Measurement in Dynamic Factor Demand Models: Theory and an Application to the U.S. Electrical Machinery Industry," Working Papers 91-04, C.V. Starr Center for Applied Economics, New York University.
  21. Karl Whelan, 2000. "Computers, obsolescence, and productivity," Open Access publications 10197/244, School of Economics, University College Dublin.
  22. Hulten, Charles R. & Wykoff, Frank C., 1981. "The estimation of economic depreciation using vintage asset prices : An application of the Box-Cox power transformation," Journal of Econometrics, Elsevier, vol. 15(3), pages 367-396, April.
  23. repec:adr:anecst:y:2000:i:58:p:05 is not listed on IDEAS
  24. Jonas D. M. Fisher, 2006. "The Dynamic Effects of Neutral and Investment-Specific Technology Shocks," Journal of Political Economy, University of Chicago Press, vol. 114(3), pages 413-451, June.
  25. Ellen R. McGrattan & James A. Schmitz, 1999. "Maintenance and repair: too big to ignore," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Fall, pages 2-13.
  26. Bitros, George C, 1976. "A Statistical Theory of Expenditures in Capital Maintenance and Repair," Journal of Political Economy, University of Chicago Press, vol. 84(5), pages 917-36, October.
  27. Smets, Frank & Wouters, Rafael, 2007. "Shocks and Frictions in US Business Cycles: A Bayesian DSGE Approach," CEPR Discussion Papers 6112, C.E.P.R. Discussion Papers.
  28. Greenwood, Jeremy & Hercowitz, Zvi & Huffman, Gregory W, 1988. "Investment, Capacity Utilization, and the Real Business Cycle," American Economic Review, American Economic Association, vol. 78(3), pages 402-17, June.
  29. Selahattin Imrohoroglu & Ayse Imrohoroglu & Kaiji Chen, 2006. "The Japanese Saving Rate," American Economic Review, American Economic Association, vol. 96(5), pages 1850-1858, December.
  30. Collard, Fabrice & Kollintzas, Tryphon, 2000. "Maintenance, Utilization, and Depreciation along the Business Cycle," CEPR Discussion Papers 2477, C.E.P.R. Discussion Papers.
  31. BOUCEKKINE, Raouf & RUIZ-TAMARIT Ramon, 2001. "Capital Maintenance and Investment : Complements or Substitutes ?," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001012, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
  32. Cagri Saglam & Vladimir M. Veliov, 2008. "Role of Endogenous Vintage Specific Depreciation in the Optimal Behavior of Firms," International Journal of Economic Theory, The International Society for Economic Theory, vol. 4(3), pages 381-410.
  33. Parks, Richard W, 1979. "Durability, Maintenance and the Price of Used Assets," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 197-217, April.
  34. Oliner, Stephen D, 1996. "New Evidence on the Retirement and Depreciation of Machine Tools," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 57-77, January.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:39:y:2014:i:c:p:273-286. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.