Capital maintenance and depreciation over the business cycle
Title: Capital maintenance and depreciation over the business cycle
Citation: Journal of Economic Dynamics and Control, 2014, Vol. 39, pp. 273-286
ISSN: 1879-1743; 0165-1889
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.
Available online 25 December 2013.
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