An RBC Model with Convex Investment Adjustment Costs: Lessons for Bulgaria (1999-2018)

Vasilev, Aleksandar (2021) An RBC Model with Convex Investment Adjustment Costs: Lessons for Bulgaria (1999-2018). In: Progress in Economics Research. Volume 48. NOVA. ISBN 9781685073084

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An RBC Model with Convex Investment Adjustment Costs: Lessons for Bulgaria (1999-2018)
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Abstract

We introduce investment adjustment costs 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 investment frictions for the propagation of cyclical fluctuations in Bulgaria. The model with investment frictions performs poorly vis-à-vis data, and is "rejected" in favour of the standard (frictionless) model. We thus declare the transmission mechanism associated with the convex investment adjustment costs to be an unlikely driver of the observed business cycle fluctuations in Bulgaria over the period studied.

Keywords:business cycles, convex investment adjustment costs, Tobin's q, Bulgaria
Subjects:L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:47306
Deposited On:19 Nov 2021 11:42

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