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Does the form of the Aggregate Production Function Matter for Modelling Business Cycle Fluctuations? Lessons for Bulgaria (1999-2018)

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  • Vasilev, Aleksandar

Abstract

We introduce a constant-elasticity-of-substitution (CES) production function 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 degree of substitutability between labor and capital in the aggregate production function, and found that aspect to matter relatively little for the ability of the model to match the magnitude of the observed business cycle fluctuations.

Suggested Citation

  • Vasilev, Aleksandar, 2020. "Does the form of the Aggregate Production Function Matter for Modelling Business Cycle Fluctuations? Lessons for Bulgaria (1999-2018)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 18, pages 81-86.
    • Handle: RePEc:zbw:espost:228740
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    References listed on IDEAS

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    1. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-334, June.
    2. Aleksandar Vasilev, 2015. "Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria’s 2008 flat tax reform," Economic Change and Restructuring, Springer, vol. 48(2), pages 169-185, May.
    3. Aleksandar Vasilev, 2017. "Business Cycle Accounting: Bulgaria after the introduction of the currency board arrangement (1999-2014)," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 14(2), pages 197-219, December.
    4. Di Nola Alessandro & Kocharkov Georgi & Vasilev Aleksandar, 2019. "Envelope wages, hidden production and labor productivity," The B.E. Journal of Macroeconomics, De Gruyter, vol. 19(2), pages 1-30, June.
    5. Aleksandar Vasilev, 2017. "VAT Evasion in Bulgaria: A General-Equilibrium Approach," Review of Economics and Institutions, Università di Perugia, vol. 8(2).
    6. Vasilev, Aleksandar, 2020. "Search and matching frictions and business cycle fluctuations in Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(3), pages 319-340.
    7. Aleksandar Vasilev, 2017. "Progressive taxation and (in)stability in an exogenous growth model with an informal sector," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 60(2), pages 1-13.
    8. 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.
    9. Vasilev, Aleksandar, 2009. "Business cycles in Bulgaria and the Baltic countries: an RBC approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(2), pages 148-170.
    10. Aleksandar Vasilev, 2016. "Progressive taxation and (in)stability in an endogenous growth model with human capital accumulation," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 59(2), pages 1-15.
    11. 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.
    12. Jesus Felipe & John S.L. McCombie, 2013. "The Aggregate Production Function and the Measurement of Technical Change," Books, Edward Elgar Publishing, number 1975.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    business cycles; CES aggregate production function; 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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