Identifying the depreciation rate of durables from marginal spending responses

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...

Full description

Saved in:
Bibliographic Details
Published in:Working paper 2022
Main Authors: Cao, Jin, Cui, Chao, Dinger, Valeriya, Holm, Martin B, Kang, Shulong
Format: Article
Language:English
Subjects:
consumption
durables
JEL: E21
JEL: E52
monetary policy
Online Access:Request full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary: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.