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A Real-business-cycle Model with a Stochastic Capital Share: Lessons for Bulgaria (1999–2018)

Author

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  • Aleksandar Vasilev

    (Aleksandar Vasilev is a Lecturer, Lincoln International Business School, UK.)

Abstract

We allow for a stochastic capital share into a real-business-cycle setup with a government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999–2018). We investigate the quantitative importance of the variability in capital share for cyclical fluctuations in Bulgaria. In particular, allowing for a stochastic capital share in the model increases variability of investment and employment, at the cost of decreasing the volatility of wages, and causing employment to become countercyclical. JEL Classification: E24, E32

Suggested Citation

  • Aleksandar Vasilev, 2020. "A Real-business-cycle Model with a Stochastic Capital Share: Lessons for Bulgaria (1999–2018)," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(1), pages 107-121, February.
    • Handle: RePEc:sae:mareco:v:14:y:2020:i:1:p:107-121
    DOI: 10.1177/0973801020901362
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    References listed on IDEAS

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    1. Aleksandar Vasilev, 2017. "On the Cost of Opportunistic Behavior in the Public Sector: A General-Equilibrium Approach," Journal of Public Economic Theory, Association for Public Economic Theory, vol. 19(2), pages 565-582, April.
    2. Aleksandar Vasilev, 2017. "VAT Evasion in Bulgaria: A General-Equilibrium Approach," Review of Economics and Institutions, Università di Perugia, vol. 8(2).
    3. Vasilev, Aleksandar, 2022. "How Important Are Consumer Confidence Shocks for the Propagation of Business Cycles in Bulgaria?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 63(10-12), pages 589-603.
    4. Parkin, Michael, 1988. "A method for determining whether parameters in aggregative models are structural," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 29(1), pages 215-252, January.
    5. Aleksandar Vasilev, 2020. "Search and Matching Frictions and Business Cycle Fluctuations in Bulgaria," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 19(3), pages 319-340, December.
    6. Vasilev, Aleksandar, 2017. "Business Cycle Accounting: Bulgaria after the introduction of the currency board arrangement (1999-2014)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 14(2), pages 197-219.
    7. Aleksandar Vasilev, 2015. "Macroeconomic Effects of Public-Sector Unions," LABOUR, CEIS, vol. 29(2), pages 101-126, June.
    8. Aleksandar Zdravkov Vasilev, 2009. "Business cycles in Bulgaria and the Baltic countries: an RBC approach," International Journal of Computational Economics and Econometrics, Inderscience Enterprises Ltd, vol. 1(2), pages 148-170.
    9. Rotemberg, Julio J & Woodford, Michael, 1996. "Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption," American Economic Review, American Economic Association, vol. 86(1), pages 71-89, March.
    10. Vasilev, Aleksandar, 2017. "A Real-Business-Cycle model with efficiency wages and a government sector: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 4, pages 359-377.
    11. Vasilev, Aleksandar, 2013. "Technical Appendix to "Macroeconomic effects of public sector unions"," MPRA Paper 68235, University Library of Munich, Germany, revised Dec 2015.
    12. Aleksandar Vasilev, 2017. "A Real-Business-Cycle Model with Reciprocity in Labor Relations and Fiscal Policy: The Case of Bulgaria," Bulgarian Economic Papers bep-2017-03, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised Mar 2017.
    13. Nelson, Charles R. & Plosser, Charles I., 1982. "Trends and random walks in macroeconmic time series : Some evidence and implications," Journal of Monetary Economics, Elsevier, vol. 10(2), pages 139-162.
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    Cited by:

    1. Vasilev, Aleksandar, 2020. "Can shocks to the discount factor explain business cycle fluctuations in Bulgaria (1999-2018)?," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Forthcomi.

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    More about this item

    Keywords

    Business Cycles Fluctuations; Stochastic Capital Share; Bulgaria;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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