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An RBC model with Epstein-Zin (non-expected-utility) recursive preferences: lessons from Bulgaria (1999-2018)

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 Epstein-Zin (1989, 1991) preferences into a real-business-cycle setup 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- 2018). We investigate the quantitative importance of the presence of Óearly resolution of uncertaintyÓ motive for the propagation of cyclical fluctuations in Bulgaria. Al- lowing for Epstein-Zin preferences improves the model performance against data, and in addition this extended setup dominates the standard RBC model framework, e.g., Vasilev (2009).

Keywords: Business fluctuations; Epstein-Zin preferences; Bulgaria. (search for similar items in EconPapers)
JEL-codes: E32 E22 E37 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2020-01, Revised 2020-01
New Economics Papers: this item is included in nep-dge, nep-mac, nep-tra and nep-upt
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