A theory of measuring fixed capital flows and stocks

Article type: Research Article

Authors: Hwang, Jang C.^{a; *}

Affiliations: [a] Investment and Capital Stock Division, Statistics Canada, 9th Floor Section D-7, Jean Talon Building, Tunney's Pasture, Ottawa, Ontario, Canada K1A 0T6

Correspondence: [*] My thanks go to the Statistics Canada Research Sabbatical Program which makes this research possible, and to members of the Research Fellowships and Internships Committee who accepted my proposal, reviewed the manuscripts, and gave valuable comments. Special thanks are due to Mr. P. Koumanakos and Mr. R. Durand of Statistics Canada for their support and valuable comments. The views presented here of course represent those of the author only, and should not be interpreted as representing the views of Statistics Canada or members of its staff.

Abstract: This paper presents a theoretical perpetual inventory model for measuring both the quantity and price sides of fixed capital flows and stocks. Because conventional models only measure the quantity side of fixed capital flows and stocks, it is difficult to fit the economic depreciation variable into the models. This paper provides a clear picture of how physical depreciation and economic depreciation are applied to the quantity side and price side of the model. The new model presented in this paper also generalizes the conventional model. In any case, the conventional model which uses the deflator of the gross fixed capital formation as the deflator of all fixed capital flows and stocks is questionable.

DOI: 10.3233/JEM-1996-22104

Journal: Journal of Economic and Social Measurement, vol. 22, no. 1, pp. 57-79, 1996