The role of endogenous capital depreciation rate for business cycle dynamics: lessons from Bulgaria (1999-2018)

Vasilev, Aleksandar (2021) The role of endogenous capital depreciation rate for business cycle dynamics: lessons from Bulgaria (1999-2018). Journal of Mathematical Economics and Finance, 6 (2(11)). pp. 7-21. ISSN 2458-0813

Full content URL: https://doi.org/10.14505/jmef.v6.2(11).01

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The role of endogenous capital depreciation rate for business cycle dynamics: lessons from Bulgaria (1999-2018)
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Abstract

We allow for an endogenous depreciation rate of physical capital stock into a real-
business-cycle model 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 endogenous depreciation rate,
and indirectly, the capital utilization mechanism for cyclical fluctuations in Bulgaria.
Allowing for endogenous variations in the depreciation rate of capital 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, and a fixed depreciation rate e.g., Vasilev (2009).

Keywords:Business cycle uctuations, capital utilization rate, endogenous depreciation rate, Bulgaria
Subjects:L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
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ID Code:46948
Deposited On:18 Oct 2021 11:44

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