Estimating capital stock and return on capital for Georgia
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Date
2020
Journal Title
Journal ISSN
Volume Title
Publisher
Ivane Javakhishvili Tbilisi State University Press
Abstract
In this paper, we estimate capital stock for Georgia using the Perpetual
Inventory Model (PIM). Due to data constraints, different techniques are used
to estimate the model’s parameters. The model is based on public and private
annual investment data from 1996-2017. Georgia’s Statistics Office doesn’t publish
official capital stock data, a key variable in estimating aggregate production
function which is essential for economic growth models, productivity analysis,
and many other macroeconomic applications. Thus, our work will contribute to
different macroeconomic models on forecasting and policy analysis for Georgia.
The second part of the paper presents the calculation of return on capital using
the newly constructed capital stock series and uses the rate of return on capital
series to try to understand what affected business investment demand in Georgia
on a national level from 1999-2017.
Description
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Keywords
Capital Stock Estimation, Perpetual Inventory Model, Return on Capital, Business Investment
Citation
Economics and Business, №1, 2020, pp. 125-143