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An Economical Approach to Estimate a Benchmark Capital Stock. An Optimal Consistency Method

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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 works well, and it requires only small amounts of data, which are readily available. This makes it virtually costless in both time and funding.

Suggested Citation

  • Jose Miguel Albala-Bertrand, 2003. "An Economical Approach to Estimate a Benchmark Capital Stock. An Optimal Consistency Method," Working Papers 503, Queen Mary University of London, School of Economics and Finance.
  • Handle: RePEc:qmw:qmwecw:wp503
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    File URL: http://www.econ.qmul.ac.uk/media/econ/research/workingpapers/archive/wp503.pdf
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    1. Jose Miguel Albala-Bertrand, 1999. "Infrastructure Shortage: A Gap Approach," Working Papers 404, Queen Mary University of London, School of Economics and Finance.
    2. Hofman, André A., 2000. "The economic development of Latin America in the twentieth century," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1650 edited by Eclac, December.
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    Cited by:

    1. Emmanuel C. Mamatzakis, 2007. "An Analysis of the Impact of Public Infrastructure on Productivity Performance of Mexican Industry," CESifo Working Paper Series 2099, CESifo Group Munich.
    2. Claudia Henríquez G., 2008. "Stock de Capital en Chile (1985-2005): Metodología y Resultados," Economic Statistics Series 63, Central Bank of Chile.

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    Keywords

    Benchmark capital; Perpetual Inventory Method (PIM); Potential output; Capital productivity; Optimal Consistency Method (OCM);

    JEL classification:

    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
    • B4 - Schools of Economic Thought and Methodology - - Economic Methodology

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