Research article Special Issues

Can shocks to the discount factor explain business cycle fluctuations in Bulgaria (1999–2018)?

  • Received: 24 July 2020 Accepted: 21 August 2020 Published: 25 August 2020
  • JEL Codes: E24, E32

  • A stochastic discount factor is introduced into a real-business-cycle setup with a government sector. The model is calibrated to Bulgarian data for the period 1999–2018, which is after the introduction of the currency board arrangement. The quantitative importance of shocks to the discount factor is investigated for the propagation of cyclical fluctuations in Bulgaria. In particular, allowing for a stochastic discount factor in the setup improves the model fit vis-a-vis data by increasing variability of employment and wages. However, those improvements are at the cost of increasing the volatility of consumption and investment.

    Citation: Aleksandar Vasilev. Can shocks to the discount factor explain business cycle fluctuations in Bulgaria (1999–2018)?[J]. National Accounting Review, 2020, 2(3): 285-296. doi: 10.3934/NAR.2020016

    Related Papers:

  • A stochastic discount factor is introduced into a real-business-cycle setup with a government sector. The model is calibrated to Bulgarian data for the period 1999–2018, which is after the introduction of the currency board arrangement. The quantitative importance of shocks to the discount factor is investigated for the propagation of cyclical fluctuations in Bulgaria. In particular, allowing for a stochastic discount factor in the setup improves the model fit vis-a-vis data by increasing variability of employment and wages. However, those improvements are at the cost of increasing the volatility of consumption and investment.
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    © 2020 the Author(s), licensee AIMS Press. This is an open access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0)
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