The role of endogenous capital depreciation rate for business cycle dynamics: lessons from Bulgaria (1999-2018)

Aleksandar Vasilev

EconStor Open Access Articles and Book Chapters, 2021, issue forthcoming

Abstract: We allow for an endogenous depreciation rate of physical capital stock into a real-business-cycle model with a 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 quantitative importance of the endogenous depreciation rate, and indirectly, the capital utilization mechanism for cyclical fluctuations in Bulgaria. Allowing for endogenous variations in the depreciation rate of capital improves the model performance against data, and in addition this extended setup dominates the standard RBC model framework with constant depreciation and a fi xed utilization rate of physical capital, and a fixed depreciation tate e.g., Vasilev (2009).

Keywords: Business cycle fluctuations; capital utilization rate; endogenous depreciation rate; Bulgaria (search for similar items in EconPapers)
JEL-codes: E22 E32 E37 (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:233514

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