Since the data of foreign capital stock 
is not available
statistically,
it is built in the following way called a perpetual inventory
method(PI-method).
In this method, host firms' aggregated capital stock
at each time (
)
is assumed to be the discounted accumulation of FDI flows. That is:
where is host firms' aggregated capital stock at time t,
is a real(deflated) FDI flow at time t,
is a capital retirement(depreciation) rate,
is an expected lifetime of capital(asset).
The retirement(depreciation) rate of capital(¦Ä) is estimated in the following way.
where is an expected lifetime of capital(asset).
Due to (A5), data of yen-evaluated FDIs are used in (5-3-1).