Norges Bank

Working Paper

Identifying the depreciation rate of durables from marginal spending responses

Author:
Jin Cao, Chao Cui, Valeriya Dinger, Martin B. Holm and Shulong Kang
Series:
Working Paper
Number:
1/2022

Abstract

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.

Norges Bank’s working papers present research projects and reports that are generally not in their final form. Other analyses by Norges Bank’s economists are also included in the series. The views and conclusions in these documents are those of the authors.

Norges Bank’s Working Papers are also distributed by RepEcSSRN and BIS Central Bank Research Hub.

ISSN 1502-8190 (online)

Published 28 January 2022 10:50
Published 28 January 2022 10:50