 Endogenous capital depreciation and technology shocksYota Deli () Journal of International Money and Finance, 2016, vol. 69, issue C, 318-338 Abstract: I examine the dynamic impact of capital maintenance on key aggregates through the depreciation rate. I find that two factors are crucial for the short-run effects of Total Factor Productivity and Investment-Specific shocks: (i) the marginal efficiency of maintenance and its connection with the rate of utilization, and (ii) the interplay between the intertemporal effect of maintenance and the substitution effect between maintenance and utilization. The latter is expressed by the relative size of the elasticity of maintenance to the Hicksian elasticity of complementarity between maintenance and utilization. These theoretical results suggest that to match the observed responses of the macroeconomic aggregates the sign of the cross derivative should be negative and that the relative size of the Hicksian elasticity should be smaller than the maintenance elasticity of marginal depreciation. Finally, the model suggests that the main macroeconomic aggregates react procyclically, with the exception of maintenance, the behavior of which depends on the type of the shock. Keywords: RBC; Endogenous depreciation; Maintenance; Technology shocks (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:69:y:2016:i:c:p:318-338 DOI: 10.1016/j.jimonfin.2016.09.004 Access Statistics for this article Journal of International Money and Finance is currently edited by J. R. Lothian More articles in Journal of International Money and Finance from Elsevier |
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