A Real-business-cycle Model with a Stochastic Capital Share: Lessons for Bulgaria (1999–2018) | Zendy

Vasilev Aleksandar | Zendy

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A Real-business-cycle Model with a Stochastic Capital Share: Lessons for Bulgaria (1999–2018)

Author(s) -

Vasilev Aleksandar

Publication year - 2020

Publication title -

margin: the journal of applied economic research

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 0.201

H-Index - 11

eISSN - 0973-8029

pISSN - 0973-8010

DOI - 10.1177/0973801020901362

Subject(s) - business cycle , bulgarian , volatility (finance) , currency board , economics , capital (architecture) , investment (military) , monetary economics , currency , capital investment , government (linguistics) , stochastic modelling , macroeconomics , econometrics , finance , history , linguistics , philosophy , archaeology , politics , political science , law

We allow for a stochastic capital share into a real-business-cycle setup 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 variability in capital share for cyclical fluctuations in Bulgaria. In particular, allowing for a stochastic capital share in the model increases variability of investment and employment, at the cost of decreasing the volatility of wages, and causing employment to become countercyclical. JEL Classification: E24, E32

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