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Capital Maintenance and Depreciation over the Business Cycle

Author

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  • Alice Albonico
  • Sarantis Kalyvitis

    () (DIEES, AUEB)

  • Evi Pappa

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 it to infer the time profile of equipment capital depreciation in Canadian and US manufacturing. Contrary to existing estimates, the depreciation rate is estimated to be volatile and highly procyclical over that last 50 years in both countries.

Suggested Citation

  • Alice Albonico & Sarantis Kalyvitis & Evi Pappa, "undated". "Capital Maintenance and Depreciation over the Business Cycle," DEOS Working Papers 1326, Athens University of Economics and Business.
  • Handle: RePEc:aue:wpaper:1326
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    References listed on IDEAS

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    Cited by:

    1. Yue, Qiang & Wang, Heming & Gao, Chengkang & Du, Tao & Li, Mingjun & Lu, Zhongwu, 2016. "Analysis of iron in-use stocks in China," Resources Policy, Elsevier, pages 315-322.
    2. Deli, Yota D., 2016. "Endogenous capital depreciation and technology shocks," Journal of International Money and Finance, Elsevier, pages 318-338.
    3. Raouf Boucekkine & Bruno De Oliveira Cruz, 2015. "Technological Progress and Investment: A Non-Technical Survey," Working Papers halshs-01145485, HAL.
    4. Chin-Yoong Wong & Yoke-Kee Eng, 2015. "Surviving Asymmetry in Capital Flows and the Business Cycles: The Role of Prudential Capital Controls," Review of Development Economics, Wiley Blackwell, pages 545-563.
    5. repec:spr:soinre:v:132:y:2017:i:2:d:10.1007_s11205-016-1315-4 is not listed on IDEAS
    6. Paul De Grauwe & Eddie Gerba, 2015. "Stock Market Cycles and Supply Side Dynamics: Two Worlds, One Vision?," CESifo Working Paper Series 5573, CESifo Group Munich.
    7. Paul De Grauwe & Eddie Gerba, 2016. "Stock market cycles and supply side dynamics: two worlds, one vision?," Working Papers 1626, Banco de España;Working Papers Homepage.
    8. Klepsch, Catharina & Elsas, Ralf, 2016. "How and when do firms adjust their investments toward targets?," Annual Conference 2016 (Augsburg): Demographic Change 145486, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    real business cycle; endogenous capital depreciation; maintenance;

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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