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The role of energy in a real-business-cycle model with an endogenous capital utilization rate and a government sector: the case of Bulgaria (1999-2016)

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  • Vasilev, Aleksandar

Abstract

We introduce a pro-cyclical endogenous utilization rate of physical capital 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 utilitization mechanism working through the use of energy for cyclical fluctuations 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

  • Vasilev, Aleksandar, 2018. "The role of energy in a real-business-cycle model with an endogenous capital utilization rate and a government sector: the case of Bulgaria (1999-2016)," EconStor Preprints 173966, ZBW - Leibniz Information Centre for Economics.
  • Handle: RePEc:zbw:esprep:173966
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    File URL: https://www.econstor.eu/bitstream/10419/173966/1/RBC_energy.pdf
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    References listed on IDEAS

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    1. Vasilev, Aleksandar, 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," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics, pages 169-185.
    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, 2017. "Business Cycle Accounting: Bulgaria after the introduction of the currency board arrangement (1999-2014)," EconStor Open Access Articles, ZBW - Leibniz Information Centre for Economics.
    4. 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.
    5. Vasilev, Aleksandar & Maksumov, Rashid, 2010. "Critical analysis of Chapter 23 of Keynes’s Notes on Mercantilism in The General Theory of Employment, Interest and Money (1936)," EconStor Research Reports 155318, ZBW - Leibniz Information Centre for Economics.
    6. repec:zbw:espost:170575 is not listed on IDEAS
    7. Aleksandar Vasilev, 2016. "Search and Matching Frictions and Business Cycle Fluctuations in Bulgaria," Bulgarian Economic Papers (www.bep.bg) bep-2016-03, St Kliment Ohridski University of Sofia, Faculty of Economics and Business Administration / Center for Economic Theories and Policies, revised Feb 2016.
    8. 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.
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    More about this item

    Keywords

    Business fluctuations; capital utilization rate; endogenous depreciation rate; 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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