A Real-Business-Cycle Setup with Housing: Lessons for Bulgaria (1999-2024)

Aleksandar Vasilev

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: Housing stock, and the accumulation of utility-enhancing housing capital are introduced as an additional mechanism into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2024). The quantitative importance of the presence of housing capital accumulation is investigated for the propagation of cyclical fluctuations in Bulgaria. In particular, allowing for housing considerations in the setup improves the model fit vis-a-vis data by increasing the variability of employment and decreasing the variability of consumption and investment. However, those improvements are at the cost of decreasing the volatility of wages. The model severely over-predicts variability of housing investment, and wrongly concludes that it is counter-cyclical. Still, the model with housing is a clear improvement relative to the standard RBC setup.

Keywords: housing; business cycles (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2026
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Working Paper: A Real-Business-Cycle Setup with Housing: Lessons for Bulgaria (1999-2024) (2026)
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