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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).

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  • 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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    13. 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.
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    More about this item

    Keywords

    Business fluctuations; capital utilization rate; endogenous depreciation rate; energy prices; Bulgaria;
    All these keywords.

    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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