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Are firing costs important for business cycles? Lessons from Bulgaria (1999-2018)

Author

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  • Aleksandar Vasilev

    (Lincoln International Business School, UK.)

Abstract

We introduce firing costs into a real-business-cycle setup augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2018). We investigate the importance of such labor market frictions for cyclical fluctuations in Bulgaria. Firing costs decrease employment volatility and pro-cyclicality, where both effects come at odds with data. Besides those, we do not find other important effects of firing costs for business cycle fluctuations in Bulgaria.

Suggested Citation

  • Aleksandar Vasilev, 2021. "Are firing costs important for business cycles? Lessons from Bulgaria (1999-2018)," Bulgarian Economic Papers bep-2021-03, 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 2021.
    • Handle: RePEc:sko:wpaper:bep-2021-03
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    Keywords

    business cycle fluctuations; labor markets; firing costs; 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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