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)

Aleksandar Vasilev

Central European Economic Journal, 2018, vol. 5, issue 52, 130-141

Abstract: 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: business fluctuations; capital utilization rate; endogenous depreciation rate; energy use; energy prices; Bulgaria (search for similar items in EconPapers)
JEL-codes: E22 E32 E37 (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The role of energy in a real-business-cycle model with an endogenous capital utilization rate and a government sector: lessons from Bulgaria (1999-2016) (2019)
Working Paper: The Role of Energy in a Real-business-cycle Model with an Endogenous Capital Utilization Rate and a Government Sector: Lessons from Bulgaria (1999-2016) (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ceuecj:v:5:y:2018:i:52:p:130-141:n:8

DOI: 10.1515/ceej-2018-0011

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