The Role of Energy in a Real Business Cycle Model with an Endogenous Capital Utilization Rate in a Government Sector: Lessons from Bulgaria (1999–2016)

Abstracts

EN

We introduce a pro-cyclical endogenous utilization rate of physical capital stock into a real business cycle model augmented with a government sector in detail. 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 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)).

Keywords

EN

business fluctuations; capital utilization rate; endogenous depreciation rate; energy use; energy prices; Bulgaria

• Publisher: Uniwersytet Warszawski. Wydawnictwo Naukowe Wydziału Zarządzania
• Journal: Central European Economic Journal
• Year: 2018
• Volume: 5
• Issue: 52

Dates

published

2019-07-12

Contributors

other

Aleksander Vasilev

• Lecturer, Lincoln International Business School Brayford Wharf, UK

Identifiers

DOI

10.1515/ceej-2018-0011