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A Real-Business-Cycle Setup with Housing: Lessons for Bulgaria (1999-2024)

Author

Listed:
  • Aleksandar Vasilev

    (Lincoln International Business School, UK)

Abstract

Housing stock, and the accumulation of utility-enhancing housing capital are introduced as an additional mechanism into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2024). The quantitative importance of the presence of housing capital accumulation is investigated for the propagation of cyclical fluctuations in Bulgaria. In particular, allowing for housing considerations in the setup improves the model vis-a-vis data by increasing the variability of employment and decreasing the variability of consumption and investment. However, those improvements are at the cost of decreasing the volatility of wages. The model severely over-predicts variability of housing investment, and wrongly concludes that it is counter-cyclical. Still, the model with housing is a clear improvement relative to the standard RBC setup.

Suggested Citation

  • Aleksandar Vasilev, 2026. "A Real-Business-Cycle Setup with Housing: Lessons for Bulgaria (1999-2024)," Bulgarian Economic Papers bep-2026-01, 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 Jan 2026.
    • Handle: RePEc:sko:wpaper:bep-2026-01
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    Keywords

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    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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