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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)

Aleksandar Vasilev

Bulgarian Economic Papers (www.bep.bg) from St Kliment Ohridski University of Sofia, Faculty of Economics and Business Administration / Center for Economic Theories and Policies

Abstract: We introduce a pro-cyclical endogenous utilization rate of physical capita1 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 utilization mechanism working through the use of energy for cyclical uctuations 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 uctuations; capital utilization rate; endogenous depreciation rate; energy use; energy prices; Bulgaria (search for similar items in EconPapers)
JEL-codes: E32 E22 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-ene, nep-mac and nep-tra
Date: 2018-04, Revised 2018-04
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https://www.uni-sofia.bg/index.php/eng/content/dow ... file/BEP-2018-05.pdf First version, 2018 (application/pdf)

Related works:
Journal Article: 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) (2018) Downloads
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) (2018) Downloads
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