Capital Stocks, Capital Services, and Depreciation: An Integrated Framework

Bank of England Working Paper No. 192

85 Pages Posted: 2 Feb 2004

See all articles by Nicholas Oulton

Nicholas Oulton

London School of Economics - Centre for Macroeconomics(CFM)

Sylaja Srinivasan

Bank of England - Monetary Analysis

Date Written: June 2003

Abstract

Neo-classical theory provides an integrated framework by means of which we can measure capital stocks, capital services and depreciation. In this paper the theory is set out and reviewed.

The paper finds that the theory is quite robust and can deal with assets like computers that are subject to rapid obsolescence. Using the framework, estimates are presented of aggregate wealth, aggregate capital services and aggregate depreciation for the United Kingdom between 1979 Q1 and 2002 Q2, and the results are tested for sensitivity to the assumptions. We find that the principal source of uncertainty in estimating capital stocks and capital services relates to the treatment and measurement of investment in computers and software. Applying US methods for these assets to UK data has a substantial effect on the growth rate of capital services and on the ratio of depreciation to GDP.

Keywords: Capital stocks, capital services, depreciation

JEL Classification: E22, O47

Suggested Citation

Oulton, Nicholas and Srinivasan, Sylaja, Capital Stocks, Capital Services, and Depreciation: An Integrated Framework (June 2003). Bank of England Working Paper No. 192. Available at SSRN: https://ssrn.com/abstract=492062 or http://dx.doi.org/10.2139/ssrn.492062

Nicholas Oulton (Contact Author)

London School of Economics - Centre for Macroeconomics(CFM) ( email )

Houghton Street
London WC2A 2AE
United Kingdom

HOME PAGE: http://https://ideas.repec.org/e/pou3.html

Sylaja Srinivasan

Bank of England - Monetary Analysis ( email )

Threadneedle Street
London EC2R 8AH
United Kingdom

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