Capital maintenance and depreciation over the business cycle Articles uri icon

publication date

  • February 2014

start page

  • 273

end page

  • 286

volume

  • 39

International Standard Serial Number (ISSN)

  • 0165-1889

Electronic International Standard Serial Number (EISSN)

  • 1879-1743

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 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.

subjects

  • Economics

keywords

  • real business cycle; endogenous capital depreciation; maintenance