Download Constructing Capital Stock Measures

Econ 562
Topics in Growth and Development
S.L. Parente
For this data set, you will need to download the excel spreadsheet titled Capital Stock Data.xls on the
course homepage. The data you will need is in the sheet called raw data.
You are two construct capital stock measures for the US economy over the 1962-2010 period under two
alternative assumptions about the initial starting value, K0.
Follow the following steps
1. Construct a real investment series by calculating I t 
~
It
Pt
~
Where I t is nominal (current price) investment and Pt is the GDP Deflator, namely
~
Yt
~
where Yt is nominal (current price) GDP and Yt is real (constant price) GDP or the chain
Pt 
Yt
weighted quantity index for GDP.
2. Determine the average ratio of depreciation to GDP over the 1962-2010 period. In the Excel file,
depreciation in current year prices is denoted by Consumption of Fixed Capial.
3. Use the Data for Real investment and the average ratio of depreciation to GDP calculated in
steps 1 and 2, to construct a series for the capital stock following the rule
K t 1  (1   ) K t  I t
1 / 10
a. For the first capital stock series, choose K1962 so that K1963 / K1962  ( K1972 / K1962) .
b. For the second capital stock series, , choose K1962 so that K1962 / Y1962  (

1971
1962
K t / Yt ) / 10
Hand in a graph comparing the two capital stocks you constructed in a and b, with the two calibrated
depreciation rates, and the values for K T .
0