A Real-business-cycle Model with a Stochastic Capital Share: Lessons for Bulgaria (1999–2018). (February 2020)

• Record Type: Journal Article
• Authors: Vasilev, Aleksandar
• Is Part Of: Margin. Volume 14:Number 1(2020:Feb.)
• Page Start: 107
• Page End: 121
• Publication Date: 2020-02
• Subjects: Business Cycles Fluctuations -- Stochastic Capital Share -- Bulgaria; Economics -- Periodicals; Economics -- India -- Periodicals; Economics -- Asia -- Periodicals; Economic policy -- Periodicals; Economic development -- Periodicals; Economic development -- India -- Periodicals; Economic development -- Asia -- Periodicals; India -- Economic policy -- Periodicals; Asia -- Economic policy -- Periodicals; 338.9
• DOI: 10.1177/0973801020901362
• Languages: English
• ISSNs: 0973-8010

Abstract

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