Identifying the depreciation rate of durables from marginal spending responses
- Jin Cao, Chao Cui, Valeriya Dinger, Martin B. Holm and Shulong Kang
- Working Paper
This paper presents a novel method to estimate the depreciation rate of durable goods using a combination of identified marginal and average spending shares. We apply our method to Chinese spending responses to disposable income changes induced by monetary policy in 2008-2009. The marginal spending response is 0.40. Durable goods make up about 45% of this marginal spending response. By combining this marginal spending share on durables with an average spending share of 14%, we estimate the annual depreciation rate of durables in China to be 0.16.
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ISSN 1502-8190 (online)