Estimating the Euler Equation for Aggregate Investment with Endogenous Capital Depreciation
This paper looks at the empirical consequences of introducing endogenous capital depreciation in the standard neoclassical model with quadratic adjustment costs. To this end, we formulate an empirical specification that accommodates capital maintenance and utilization in the Euler equations for aggregate investment. The empirical estimates with data from the Canadian survey on Capital and Repair Expenditures show that, in contrast to the existing literature, the performance of the Euler equations is improved when we account for the impact of variable capital depreciation.
|Date of creation:||02 Feb 2011|
|Publication status:||Forthcoming in Southern Economic Journal|
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- J. Aznar-Márquez & J. R. Ruiz-Tamarit, "undated".
"Endogenous Growth, Capital Utilization and Depreciation,"
- J. Aznar-Marquez & J.R. Ruiz-Tamarit, 2001. "Endogenous Growth, Capital Utilization and Depreciation," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2001037, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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