Data Help - Capital Stock

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michaelk
Posts: 7
Joined: Wed Jan 16, 2019 6:19 pm

Data Help - Capital Stock

Postby michaelk » Wed Jan 23, 2019 5:08 pm

Hi All,

I was wondering if anyone has been using Capital Stock (for countries, annual data) as of late?
I am attempting to create an investment equation (Physical Capital Stock + (1- depreciation rate of capital) x gross fixed capital formation).
I have found Private capital stock data sets (www.imf.org/external/np/fad/publicinves ... 22216.xlsx), shown as kpriv_n and using Australia, however the figure is larger than GDP. Because the capital stock is larger than GDP in the above equation, it means that Investment is larger than GDP, which in Keynes theory is not possible (Y=C+I+G+NE).

Has anyone used capital stock with definitions lately that could help here?

Thank you

startz
Non-normality and collinearity are NOT problems!
Posts: 3775
Joined: Wed Sep 17, 2008 2:25 pm

Re: Data Help - Capital Stock

Postby startz » Wed Jan 23, 2019 7:56 pm

I'm not sure you have the investment equation right. Could you be a little more explicit about how you calculate I? I it possible your + should be a -?

michaelk
Posts: 7
Joined: Wed Jan 16, 2019 6:19 pm

Re: Data Help - Capital Stock

Postby michaelk » Mon Jan 28, 2019 4:30 pm

Hi Strartz.
The investment equation is correct.
Accumulation (Investment/nominal GDP) is assumed to be a function of expected profitability, which is proxied by profit share and capacity utilisation. The estimates of capital stock and consumption of fixed capital are prepared using the PIM method.

Estimates of consumption of fixed capital, and hance net capital stock, are derived using a depreciation function based on the expected economic life of the asset. Investment is measured by = physical capital stock +(1-depreciation rate of capital) x gross fixed capital formation.

In my study, investment is referred to the growth of capital stock.

At the moment, however, I can only get capital stock that is higher than nominal GDP.
The literature states that capital stock is hard to find and the calculations of this can be advanced.

I was just wondering if anyone had worked with such a data set previously that is below nominal GDP

startz
Non-normality and collinearity are NOT problems!
Posts: 3775
Joined: Wed Sep 17, 2008 2:25 pm

Re: Data Help - Capital Stock

Postby startz » Mon Jan 28, 2019 4:49 pm

First, there you can't compare numbers for capital stock and GDP flow. The units aren't the same. What is true in the United States is that the stock of capital is roughly three times the annual flow of GDP.

If I is investment and K is the capital stock then

K(t) = I(t) + (1-depreciation rate)*K(t-1)

This is an identity. Turning it around gives

I(t) = K(t) - (1-depreciation rate)*K(t-1)

michaelk
Posts: 7
Joined: Wed Jan 16, 2019 6:19 pm

Re: Data Help - Capital Stock

Postby michaelk » Wed Jan 30, 2019 11:46 pm

Hello

Thank you for assisting here.
I have a few more questions for you!

The equation is:

Investment = physical capital stock +(1-depreciation rate of capital) x gross fixed capital formation.

or

INV = K + (1-a) x K2

At the moment, I have K2 and a datsets. The problem arises where there is no data for countries that accurately illustrate K (Physical capital stock).
There are suggestions that K can be given as a bench mark (say 1980 K = 50 billion) and the use of K2 and depreciation creates K as reliable (to the best available method).

So taking your idea to find K

K = Inv - (1-a) x K2

Reading some of the literature, investment = K2 (gross fixed capital formulation) as an acceptable measure of investment.
If we use the equation above, K will end up being the depreciation rate.

What do you think?

Thank you once again sir, your view points are most welcome!

startz
Non-normality and collinearity are NOT problems!
Posts: 3775
Joined: Wed Sep 17, 2008 2:25 pm

Re: Data Help - Capital Stock

Postby startz » Thu Jan 31, 2019 12:07 am

You need to be clear on the difference between the capital stock and capital stock formation. Probably need to look carefully at the definitions in the data source.


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