Inflation Accounting and Nonfinancial Corporate Profits: Physical Assets

Jeremy Bulow and

JB

Jeremy Bulow Stanford University

John B. Shoven

John B. Shoven Charles R. Schwab Professor of Economics - Stanford University, and NBER

Discussants: William J. Fellner and

WJF

William J. Fellner

Edward Gramlich

EG

Edward Gramlich

THIS ARTICLE is the first of two complementary papers concerning inflation accounting and nonfinancial corporate profits. This installment discusses the general conceptual and practical issues in defining an inflation-adjusted measure of profits and examines the treatment of depreciable assets and inventories in detail. The companion article, to appear subsequently in BPEA, will analyze accounting practices for financial assets and liabilities, and also aggregate and summarize the results of both papers.