DEPRECIATION OF DURABLE GOODS IN AN UNSTABLE ECONOMY: THE CASE OF ARGENTINA “ A Hulten&Wycof...
Transcript of DEPRECIATION OF DURABLE GOODS IN AN UNSTABLE ECONOMY: THE CASE OF ARGENTINA “ A Hulten&Wycof...
1
DEPRECIATION OF DURABLE DEPRECIATION OF DURABLE GOODS IN AN UNSTABLE GOODS IN AN UNSTABLE ECONOMY: THE CASE OF ECONOMY: THE CASE OF
ARGENTINA ARGENTINA ““A Hulten&Wycof ApproachA Hulten&Wycof Approach””
Ariel CorembergAriel CorembergECLAC Buenos Aires ArgentinaECLAC Buenos Aires Argentina
CONICET/IDESCONICET/[email protected]@[email protected]
The 2008 World Congress on National Accounts and Economic Performance Measures for Nations
May 12–17, 2008Key Bridge Marriott (Arlington, VA—minutes from Washington D.C.)
2
Identification of the Depreciation Identification of the Depreciation Pattern in emerging economies using Pattern in emerging economies using
Vintage Assets Prices (H&W Vintage Assets Prices (H&W approach)approach)
Argentina during 1998-2002: the biggest & Argentina during 1998-2002: the biggest & longest economic depression of its modern longest economic depression of its modern
economic history, DDD currency devaluation economic history, DDD currency devaluation (default & desdoralization) which provoked a (default & desdoralization) which provoked a
high instability in relative priceshigh instability in relative prices
OBJECTIVEOBJECTIVE
3
• (Koopmans 1947) This research applies the famous Koopman`s motto:“It is necessary to avoid Measurement without theory”
• (J. Hicks 1981) quoted by Hulten“ The measurement of capital is one of the nastiest jobs that economists have set to statisticians”
• Diewert (2003): “The main problem in accounting is determining the value of capital goods that are used by the firm more than one fiscal year”
4
SUMMARYSUMMARYConceptual and Theoretical IssuesConceptual and Theoretical Issues• Importance • Concepts (SNA93, OECD, Hill, Hulten, Diewert)• Main Standard Depreciation Methods• Asymmetric Information in Durable Goods
Empirical Results in ArgentinaEmpirical Results in Argentina• Box Cox Test: Simple and Double Form• Crossection and Panel Data Results• Age Price Profile Under Inflation
5
• The empirical estimation of rate & depreciation pattern reduces the uncertainty about the real value of capital stock calculated by PIM by standard (fix) assumptions
• If the depreciation shape is not geometric, the aggregate depreciation depends on age structure of the stock and also is endogenous.
• The Instability of the relative prices in developing countries could have effects on durable goods market and also on age price profile
• The use of standard price index could biased the capital stock and also the analysis of wealth and productivity of an economy
6
0
20
40
60
80
100
120
0 1 2 3 4 5 6 7 8 9 10Age
Pri
ce
of
Ca
pit
al
Go
od
(Y
ea
r 0
=1
00
)
Hiperbolic b=0.75
Straight Line
Geometric
Geometric R=2
Sum of the digits
AGE PRICE PROFILESAGE PRICE PROFILES
7
1. Econometric estimation of the hedonic price indicator in the base year
2. Econometric Test of Functional Shape of Depreciation (Box-Cox test)
3. Testing the Functional Shape of the Withdrawals Function
4. Valuation of the physical stock according to their attributes
5. Measuring the capital stock series by PIM (benchmarking HV base year)
n
i iii uabp1
log
ap* pppp 1* ii
iaa 1*
Hedonic Valuation MethodHedonic Valuation Method
8
HEDONIC VALUATION (58.5%)•DWELLING UNITS
•NON RESIDENTIAL PRIVATE CONSTRUCTION
•LIVESTOCK
•AGRICUTURAL ASSETS
•FARM TRACTORS & OTHER AGRICULTURAL MACHINES
•AIRCRAFTS
•TRANSPORT EQUIPMENT
PIM (41.5%)
•REST OF DURABLE EQUIPMENT AND MACHINES
•PUBLIC WORKS
CAPITAL STOCK IN ARGENTINA BY METHODCAPITAL STOCK IN ARGENTINA BY METHOD
9
Depreciation Value“Lemmons Problem” +Biased -BiasedCensored Data -Biased +BiasedAlternative uses Biased BiasedAge Price Profile Stability Biased Biased
TABLE 1Assymetric Information in Used Durable Goods Market
10
EFFECTS OF INFLATION ON DEPRECIATIONEFFECTS OF INFLATION ON DEPRECIATION
EFFECTS OF INFLATION ON DEPRECIACION PATTERN
0
20
40
60
80
100
120
140
160
0 1 2 3 4 5 6 7 8 9 10Age
Du
rab
le G
oo
d P
rice
Ag
e 0=
100)
Original
Neutral Inflation
Non Neutral Inflation (average life decreases)
Non Neutral Inflation (average life increases)
11
TABLE 2TABLE 2Information Sources on the Age Price Profile of Durable GoodsInformation Sources on the Age Price Profile of Durable Goods
Sources Period
Farm Tractors Surveys Prices of Farm Tractors 1997
Aircrafts Aircraft Bluebook Price Digest 2002
Cars Tax Agency based on Market Prices 1998-2002
Light commercial vehicles Tax Agency based on Market Prices 1998-2002
Buses Tax Agency based on Market Prices 1998-2002
Trucks Tax Agency based on Market Prices 1998-2002
12
ap 1
1 p
p
Box-Cox Test Simple VersionBox-Cox Test Simple Version
tap 21
;
13
Trucks: Age Price Profile 1998-2002
0
10000
20000
30000
40000
50000
60000
70000
80000
1 2 3 4 5 6 7 8 9 10 11
Age
Pri
ce
Price Obs.
Boxcox
Buses: Age Price Profile 1998-2002
0
10000
20000
30000
40000
50000
60000
1 2 3 4 5 6 7 8 9 10 11
Age
Pri
ce
Price Obs.
Boxcox
Light Commercial Vehicles: Age Price Profile 1998-2002
0
5000
10000
15000
20000
25000
30000
35000
1 2 3 4 5 6 7 8 9 10 11
Age
Pri
ce
Price Obs.
Boxcox
Cars: Age Price Profile 1998-2002
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
0 1 2 3 4 5 6 7 8 9 10
Age
Pri
ce
Price Obs.
Box-Cox
14
Farm Tractors: Age Price Profile
0
10000
20000
30000
40000
50000
60000
1 2 3 4 5 6 7 8 9 10
Age
Pri
ce
Price Obs.
Box-Cox
15
Aircrafts: Age Price Profile
0
500000
1000000
1500000
2000000
2500000
3000000
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57
Age
Pri
ce
Precio Promedio
Box-Cox
16
In every case, the test confirmed convex functional forms, but the null hypothesis of identification of any exact functional form proposed (geometric, reciprocal or linear) was rejected,
Except in the case farm tractors, In the last case, the geometric form was accepted (=0).According to table 6 by year: also buses (1999)
TABLE 3: Box-Cox Test Simple FormTABLE 3: Box-Cox Test Simple Form 1 2 Log-likelihood n. obs.
Aircraft -0,17 5,34 -0,01 -36935 2.783
Cars -0,17 -11,45 -0,03 0,01 -222518 20.675
LCV -0,03 -37,21 -0,10 0,02 -47642 Semilog 4.636
Buses -0,15 -19,71 -0,04 0,01 -12601 1.148
Trucks 0,39 -1244,31*
-3,88* 0,71 -38351 3.293
Farm Tractors
-0,06* 7,56 -0,03 -6200 semilog 571
17
211ap
Box-Cox Test: Double FormBox-Cox Test: Double Form
TABLE 7TABLE 7Box-Cox Test Double Form for Airplanes and Farm Box-Cox Test Double Form for Airplanes and Farm
TractorsTractors 1 2 1 Log-
likelihoodn. obs.
Aircraft -2,58 3,83 0,39 0,00 (31.057)
2.783
Farm Tractors -0,05 0,87 8,18 -0,05 (6.198)
571
18
TABLE 8TABLE 8Double Form Box-Cox Test for Transport Equipment by Category with Double Form Box-Cox Test for Transport Equipment by Category with
Annual frequencyAnnual frequency
Cars 1998 1999 2000 2001 2002
-0,20 -0,16 -2079,05 -0,27 -0,28
0,40 0,51 0,02* 0,76 0,80
-0,05 -0,06 -1317,15 -0,02 -0,01
4,40 5,03 9,27 3,49 3,41
Log-likelihood -33.439 -39.489 -45.689 -49.353 -54.688
n. obs. 3.098 3.673 4.243 4.682 4.998
LCV 1998 1999 2000 2001 2002
0,22 -2,10 0,45 0,34 0,09
0,14* 18707,78 0,17* 0,35 0,26
-3,12 0,00 -27,29 -7,55 -0,89
37,39 0,48 204,88 83,71 17,06
Log-likelihood -6.250 -7.508 -9.729 -10.797 -12.523
n. obs. 623 763 972 1093 1197
19
TABLE 8: Double Form Box-Cox Test for Transport Equipment by TABLE 8: Double Form Box-Cox Test for Transport Equipment by Category with Annual frequencyCategory with Annual frequency
Buses 1998 1999 2000 2001 2002
-0,79 0,10 -0,21 -0,37 -0,09*
1,13* -2.156.209* 0,22* 0,66 0,59
0,00 -395,11 -0,06 -0,01 -0,13
1,26 19,74 4,27 2,68 6,92
Log-likelihood -1358 -2178 -2584 -3146 -3258
n. obs. 127 191 242 293 308
Trucks 1998 1999 2000 2001 2002
0,06* -2,31 0,53 0,53 0,77
-1091,41 775,30 -9,39 19,79 -10,19
-2143,14 0,00 -8,78E+07 0,00 -5,20E+13
15,31 0,43 9351476,00 500,82 5,10E+12
Log-likelihood -8.083 -8.090 -12.321 -4.461 -4.868
n. obs. 692 743 1065 392 429
20
In almost every case the shape of depreciation has been convex:
1< 1 y 2<1; but in few cases an exact form could be detected
In the case of Light C.V.(1999), Buses (1999) and Trucks (1999 y 2001), there could be some atypical shapes (backward S, accelerated depreciation or in 2 steps) but they were not detected by the test
21
Table 4: Average Annual Rate of Change in Vintage Asset Vehicles PricesTable 4: Average Annual Rate of Change in Vintage Asset Vehicles Prices
Cars 1999 2000 2001 2002 LCV 1999 2000 2001 2002 Buses 1999 2000 2001 2002 Trucks 1999 2000 2001 2002
0 -13,7 13,1 3 56,6 0 39,6 -33 -8,7 71,2 0 23,9 -5,6 1 27,8 0 3 -12 -6,7 27,7
1 -8,2 2,6 -0,2 57,7 1 39,9 -29 -11 62 1 30,9 -9,8 -0,1 31,1 1 6,8 -13 16,5 5,9
2 -2,6 5,6 -8,1 49,8 2 49,1 -32 -9,9 52,4 2 31,7 -12 5,7 24,1 2 -17 8,9 -2,1 22,8
3 -1,7 1,7 0,6 43,2 3 37,5 -23 -13 55,1 3 17,5 -31 20,5 26,9 3 -10 -15 31,6 6,4
4 -0,4 -6 3,4 60,4 4 48,7 -32 -8,3 51,9 4 33,5 -31 -1 49,6 4 -13 -13 3,3 51,1
5 -2,2 -13,5 7,4 60,1 5 -1,2 -0,1 -14 55,2 5 97,8 -40 -5,3 32 5 -22 -2 3,4 19,5
The relative asset price changed through time.
The age price profile may not seem stable.
22
Table 5: Price of New VehiclesTable 5: Price of New VehiclesAnnual Rate of ChangeAnnual Rate of Change
CARS LCV TRUCKS BUSES
DGI INDEC DGI INDEC DGI INDEC DGI INDEC
1999 -1,30 -13,70 -2,30 39,60 0,50 3,00 0,20 23,90
2000 1,90 13,10 0,70 -32,60 0,00 -11,60 19,40 -5,60
2001 -7,00 3,00 -11,00 -8,70 -8,00 -6,70 -4,20 1,00
2002 78,30 56,60 86,10 71,20 64,70 27,70 193,00 27,80
The use of standard price index (with representative models) could biased the value capital stock and also the analysis of wealth and productivity of an economy.
23
Cars: Age Price Profile by Year
0
10000
20000
30000
40000
50000
60000
70000
0 1 2 3 4 5 6 7 8 9 10
Age
Pri
ce
1998
1999
2000
2001
2002
24
Buses: Age Price Profile by Year
0
10000
20000
30000
40000
50000
60000
70000
80000
1 2 3 4 5 6 7 8 9 10 11
Age
Pri
ce
1998
1999
2000
2001
2002
25
Light Commercial Vehicles: Age Price Profile by Year
0
5000
10000
15000
20000
25000
30000
35000
40000
1 2 3 4 5 6 7 8 9 10 11
Age
Pri
ce
1998
1999
2000
2001
2002
26
Trucks: Age Price Profile by Year
0
10000
20000
30000
40000
50000
60000
70000
80000
90000
0 1 2 3 4 5 6 7 8 9 10Age
Pri
ce
1998
1999
2000
2001
2002
27
Shifts in the age price profile curve Shifts in the age price profile curve due to inflation were not neutraldue to inflation were not neutral
1. Consumer Durable Goods : Cars & Light C.V.: Life Span Decreases
2. Capital Goods: Buses and Trucks: Average Life Increases
28
CAPITAL STOCK IN ARGENTINA-INDECCAPITAL STOCK IN ARGENTINA-INDEC1993
K/POP 16.423K/OUTPUT 2,30 Depreciation/Stock 5,0%Depreciation/GDP 11,4%Net Investment/GDP 7,6%Internal Rate of Return 15,6%Annual Average Rate of Growth (93-00) 2,9%
(K/POP)USA>(K/POP)ARG: u$s 84.464>u$s15.506
29
CAPITAL OUTPUT RATIOCAPITAL OUTPUT RATIOK/GDP
1994 TOTALArgentina DNCN-INDEC 2,30 Chile (BC Chile) 2,10 Brasil (IPEA) 3,10 Australia 4,00 Belgium 3,80 Canada 4,50 Denmark 5,70 Finland 5,90 France 3,10 Italy 3,90 Japan 3,00 Holland 3,70 Norway 5,30 Spain 3,20 Sweeden 4,50 United Kingdom 3,40 United States 3,60 Germany 4,00 China 2,00 Hong Kong 2,20 India 1,80 Indonesia 1,70 Corea 2,40 Malasia 2,70
30
•The econometric test weakly verifies convex depreciation in every type of durable goods
•The econometric test only verifies an exact geometric shape in the case of farm tractors (1997) and buses (1999) with B-X Simple (but any B-X double form)
•The age price profile in Argentina changes through time and it is not neutral when there is inflation
•This results are relevant in order to estimate the capital stock and empirically test the main assumptions in PIM: average life, retirement pattern and depreciation in unstable economies