Measuring Capital - OECD Manual 2009
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Measuring Capital - OECD Manual 2009

Second edition

Capital - in particular of the physical sort - plays several roles in economic life: it constitutes wealth and it it provides services in production processes. Capital is invested, disinvested and it depreciates and becomes obsolescent and there is a question how to measure all these dimensions of capital in industry and national accounts. This revised Capital Manual is a comprehensive guide to the approaches toward capital measurement. It gives statisticians, researchers and analysts practical advice while providing theoretical background and an overview of the relevant literature. The manual comes in three parts - a first part with a non-technical description with the main concepts and steps involved in measuring capital; a second part directed at implementation and a third part outlining theory and a more complete mathematical formulation of the measurement process.

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Computing Net, Gross and Productive Capital Stocks and Depreciation You or your institution have access to this content

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OECD

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At this point, the following elements should be available: an age-price and an ageefficiency profile for cohorts of particular types of assets; a depreciation profile which constitutes a direct transformation of the age-price profile and time series of gross fixed capital formation at constant prices as well as the corresponding deflators. With these elements in hand, the computation of the net stock, the value of depreciation, the productive and the gross capital stock is relatively straight forward. However, there is a practical issue that we have so far neglected – the periodicity of calculations. In most of the discussion above, allusion was made to “a period” or “a year” signalling that annual periodicity has been the implicit guide for presentation. And annual frequency is indeed the typical periodicity for capital stock measures in national statistical offices. But of course, quarterly national accounts exist and, if anything have become increasingly important in recent years. Even if balance sheets of the economy are compiled annually, flow measures such as depreciation should have their place in quarterly accounts and their calculation depends on measures of the capital stock. Moreover, a central aspect of capital services measurement is the possibility for a complete decomposition of the income side of the national accounts into price and volume measures and implementing such a pricevolume split at quarterly rhythm should at least be a medium-term objective. In principle, it is possible and should suffice to present a quarterly model for computations, along with the relevant formulae for annual data derived from quarterly variables. For many countries, this may be an unrealistic way forward, however, given data availability. For this Manual, we shall not venture into a presentation of quarterly measures and only short reference will be made to sub-annual calculations below. Otherwise, the presumption is that a period corresponds to one year.
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