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The Role of Energy in a Real-business-cycle Model with an Endogenous Capital Utilization Rate and a Government Sector: Lessons from Bulgaria (1999-2016)

Author

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  • Aleksandar Vasilev

    () (Independent Researcher)

Abstract

We introduce a pro-cyclical endogenous utilization rate of physical capita1 stock into a real-business-cycle model augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2016). We investigate the quantitative importance of the endogenous depreciation rate, and the capital utilization mechanism working through the use of energy for cyclical uctuations in Bulgaria. In particular, a positive shock to energy prices in the model works like a negative technological shock. Allowing for variations in factor utilization and the presence of energy as a factor of production improves the model performance against data, and in addition this extended setup dominates the standard RBC model framework with constant depreciation and a fixed utilization rate of physical capital, e.g., Vasilev (2009).

Suggested Citation

  • Aleksandar Vasilev, 2018. "The Role of Energy in a Real-business-cycle Model with an Endogenous Capital Utilization Rate and a Government Sector: Lessons from Bulgaria (1999-2016)," Bulgarian Economic Papers (www.bep.bg) bep-2018-05, St Kliment Ohridski University of Sofia, Faculty of Economics and Business Administration / Center for Economic Theories and Policies, revised Apr 2018.
  • Handle: RePEc:sko:wpaper:bep-2018-05
    as

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    File URL: https://www.uni-sofia.bg/index.php/eng/content/download/193189/1326259/file/BEP-2018-05.pdf
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    References listed on IDEAS

    as
    1. 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.
    2. 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.
    3. Aleksandar Vasilev, 2017. "VAT Evasion in Bulgaria: A General-Equilibrium Approach," Review of Economics and Institutions, Università di Perugia, vol. 8(2).
    4. Vasilev, Aleksandar, 2016. "Search and matching frictions and business cycle fluctuations in Bulgaria," EconStor Preprints 142336, ZBW - Leibniz Information Centre for Economics.
    5. Aleksandar Vasilev, 2017. "A Real-Business-Cycle Model with Reciprocity in Labor Relations and Fiscal Policy: The Case of Bulgaria," Bulgarian Economic Papers (www.bep.bg) bep-2017-03, St Kliment Ohridski University of Sofia, Faculty of Economics and Business Administration / Center for Economic Theories and Policies, revised Mar 2017.
    6. Vasilev, Aleksandar, 2009. "Business cycles in Bulgaria and the Baltic countries: an RBC approach," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 148-170.
    7. repec:psc:journl:v:9:y:2017:i:4:p:359-377 is not listed on IDEAS
    8. repec:zbw:espost:170575 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Business uctuations; capital utilization rate; endogenous depreciation rate; energy use; energy prices; Bulgaria;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications

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