A contribution to estimate a benchmark capital stock. An optimal consistency method

J.M. Albala-Bertrand

International Review of Applied Economics, 2010, vol. 24, issue 6, 715-729

Abstract: There are alternative methods of estimating capital stock for a benchmark year. However, these methods are costly and time-consuming, requiring the gathering of much basic information as well as the use of some convenient assumptions and guesses. In addition, a way is needed of checking whether the estimated benchmark is at the correct level. This paper proposes an optimal consistency method (OCM), which enables a capital stock to be estimated for a benchmark year, and which can also be used in checking the consistency of alternative estimates. This method, in contrast to most current approaches, pays due regards both to potential output and to the productivity of capital. It is applied to 45 cases for nine OECD countries and six Latin American ones. It works reasonably well, and it requires only small amounts of data, which are readily available. It appears to exhibit similar accuracy to alternative methods, but it is virtually inexpensive in both time and funding.

Keywords: benchmark capital; perpetual inventory method (PIM); potential output; capital productivity; optimal consistency method (OCM) (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (5)

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DOI: 10.1080/02692171.2010.512128

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