RDP 9512: Consumption, Investment and International Linkages Appendix B: The Flow Measure of Durable Services

True consumption consists of non-durables consumption plus the flow of services from consumption of durables. The latter series is calculated by assuming that the flow is proportional to the stock of durables. The stock of durables series was taken from the series on the NIF-10 database. The flow was calculated by assuming (as in McKibbin and Richards (1988)) that the net return on durables must be equal to the net return on other assets. We assume an average real return of 1.125 per cent a quarter, and a quarterly depreciation rate of 6.5 per cent for motor vehicles and 5.75 per cent for other durables. Consequently, the flow of durable services per quarter was calculated as 7.625 per cent of the stock for motor vehicles and 6.825 per cent of the stock for other durables.