Aleksandar Vasilev

University of Lincoln · Accountancy, Finance and Economics

This note presents a simple setup of credit liberalization. We find that the effect is not uniform but depends on the level of GDP. In other words, the model predicts that richer countries benefit more than poor countries from opening up their capital account. This finding has important policy implications, as it suggests that developing economies...

This paper attempts to assess the size of the grey economy, and provide a decomposition by evasion type. The modelling approach utilizes a standard micro- founded general-equilibrium setup, which is augmented with a revenue-extraction mech- anism and a government sector. The model is calibrated to Bulgaria after the intro- duction of the currency b...

Purpose This paper aims to explore the effects of fiscal policy in an economy with efficiency wages, consumption taxes and a common income tax rate. Design/methodology/approach A dynamic general-equilibrium model with the government sector is calibrated to Bulgarian data (1999–2018). Two regimes are compared and contrasted – the exogenous (observe...

We augment an otherwise standard business cycle model with a richer government sector and add modified cash in advance (CIA) and deposit considerations. In particular, both the cash in advance- and deposit constraints of in earlier work are extended to include private investment and government consumption. Also, part of the purchases are made using...

Purpose This paper explores the effects of fiscal policy in an economy with reciprocity in labor relations and fair wages, consumption taxes and a common income tax rate in place. Design/methodology/approach To this end, a dynamic general-equilibrium model with government sector is calibrated to Bulgarian data (1999–2018). Two regimes are compared...

Financial openness is introduced into a real-business-cycle setup aug- mented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999- 2020). The quantitative importance of financial openness is investigated for the stabi- lization of cyclical flu...

We utilize a relatively standard endogenous growth model with intermediaries and research and development (R&D). We augment the setup with government regulations to study the effect of regulations on aggregate allocations. The novelty is that we endogenize the problem of the regulator, so the number of regulations is determined within the model. Ne...

This paper provides an overview of the administration and the financing of the health care system in Bulgaria, starting with the model under communism, and continuing with the transition period.

Introduzimos um factor de desconto endógeno como em Uzawa (1968) e Schmitt-Grohe e Uribe (2003) numa configuração de ciclo de negócios reais com preferências do sector governamental e Greenwood et al. (1988). Calibra-se a economia artificial aos dados búlgaros para o período após a introdução do sistema de currency board (1999-2018). Em particular,...

The paper analyzes the transaction cost economizing and efficiency enhancing effects of the Soviet-type economy. The last 30 years of transition have seen the failure of market reforms in many industries in what are traditionally non-market economies. We argue that centralized, command-and-control systems are wealth maximizing in the conditions of...

In recent years more countries are moving their policy rates below zero thus posing questions needing to be researched regarding how global financial markets react to such changes. Our paper reviews what these changes mean for global financial markets, discussing that financial markets react the same way as they would if rates were lowered, asset p...

Purpose The author augments an otherwise standard business cycle model with a richer government sector and adds money-in-utility (MIU) considerations to study economic fluctuations. Design/methodology/approach More specifically, real money balances enter in a non-separable way with consumption and leisure. This specification is then calibrated to...

We introduce firing 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 importance of such labour market frictions for cyclical fluctuations in Bulgaria. Firing costs de...

Robots are introduced into a real-business-cycle setup augmented with a detailed government sector. Robots are modeled as an imperfect substitute for labor services. The model is calibrated to Bulgarian data for the period following the intro- duction of the currency board arrangement (1999-2020). The quantitative importance of the presence of robo...

Stochastic risk aversion is introduced into a dynamic general-equilibrium setup augmented with government. The theoretical framework is calibrated to Bulgarian data for the period 1999–2019. The quantitative relevance of shocks to risk aversion is investigated for the propagation of business cycles in the Bulgarian economy. More specifically, the p...

We utilize a standard endogenous-growth model with knowledge spillovers (the “k-K” model). We characterize the optimal Balanced Growth Path (BGP), and compare it to path under market competition. In the presence of externalities, markets fail. One way to restore efficiency is to subsidize knowledge accumulation, and finance the subsidy by taxing fi...

We introduce Epstein-Zin (1989, 1991) preferences into a real-business-cycle (RBC) model with government. We calibrate the model economy to Bulgarian data for the period after the currency board regime (1999-2018). We evaluate the quantitative importance of the presence of ”early resolution of uncertainty” motive for the propagation of cyclical flu...

We introduce human capital accumulation into a real-business-cycle setup. 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 presence of skill acquisition for cyclical fluctuations in Bulgaria. After subjecting the smodel...

Purpose In this study, inventories are introduced as a productive input into a real-business-cycle (RBC) setup augmented with the government. Design/methodology/approach The model is calibrated to Bulgarian data for the period 1999–2019. The quantitative importance of the presence of inventories is investigated. Findings The quantitative effect o...

This paper is a first attempt to provide a quantitative evaluation of consumer well-being resulting from the UK Soft Drinks Industry Levy introduced in April 2018. Using a model setup that encompasses both a normal case and a Giffen case for sugary drinks consumption, a computational exercise is performed to quantify the welfare social loss for a v...

This paper presents an overview of the channels of monetary transmission and their manifestation in Bulgaria – a country in a currency board arrangement – in the first five years after the introduction of the regime. The presence of such a mechanism of transmission requires some form of macroeconomic discretion. The latter is approximated here with...

A dotação de choques ao tempo é introduzida numa configuração de ciclos de negócios reais, aumentada com um sector governamental detalhado. O modelo é calibrado para dados búlgaros para o período após a introdução do sistema de currency board (1999-2018). A importância quantitativa da presença de choques no tempo total disponível para as famílias é...

This paper takes an otherwise standard real-business-cycle (RBC) setup with government sector, and augments it with an output-expropriation mechanism and shocks to institutional quality in order to study business cycle fluctuations. The extraction decision is endogenous: households can use their time either productively, or engage in opportunistic...

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 indire...

The objective of this paper is to study the problem of a discrete labour supply decision in an artificial economy where the households feature habits in consumption. We demonstrate how lotteries a la Rogerson (1988) can be used to make consumption choices into convex sets, and then produce an equivalent aggregate household with convex labour supply...

Purpose The author augments an otherwise standard business-cycle model with a rich government sector and adds monopolistic competition in the product market and rigid prices, as well as rigid wages a la Calvo (1983) in the labor market. Design/methodology/approach This specification with the nominal wage rigidity, when calibrated to Bulgarian data...

Progressive capital income taxation is introduced into a real-business-cycle (RBC) model with fiscal policy. The artificial economy is calibrated to Bulgarian data for the period 1999–2018. The quantitative role of progressive taxation on capital income is investigated in light of its possible stabilization role in Bulgaria over the business cycle....

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 fluc...

Purpose The authors introduce non-Ricardian (“hand-to-mouth”) myopic agents into an otherwise standard real-business-cycle (RBC) setup augmented with a detailed government sector. The authors investigate the quantitative importance of the presence of nonoptimizing households for cyclical fluctuations in Bulgaria. Design/methodology/approach The au...

This paper explores the effects of fiscal policy in an economy with search and matching frictions. To this end, a dynamic general-equilibrium model with government sector is calibrated to Bulgarian data (1999–2018). Two regimes are compared and contrasted – the exogenous (observed) vs. optimal policy (Ramsey) case. The focus of the paper is on the...

In this paper we provide a theoretical basis for the so-called” Armey curve,” the inverted U-shape relationship between the level of government purchases and GDP growth, named after Armey (1995). We use an otherwise standard Keynesian model, augmented with a quadratic relationship between investment and lagged government expenditure, which was docu...

We introduce government investment into a real-business-cycle setup. We calibrate the model to Bulgarian data for the period 1999–2018. We then proceed to quantitatively evaluate the effect of the public capital accumulation channel as a tool for business cycle propagation, as well the importance of public investment spending on output growth. Gove...

A business-cycle model with a modified cash-in-advance feature, government sector and one-period nominal wage contracts: the case of Bulgaria

We introduce “fair” wages in a general-equilibrium model where worker’s effort is unobservable and investigate whether such a mechanism can quantitatively account for the degree of real wage rigidity in the Bulgarian labor markets, as documented in Lozev, Vladova, and Paskaleva (2011) and Paskaleva (2016). In contrast to Danthine and Kurmann (2004)...

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...

This article compares and contrasts exogenous (observed) and optimal fiscal policy in an economy with Epstein–Zin (1989, 1991) preferences, with consumption tax, and with a common income tax, using a dynamic general-equilibrium model, calibrated for Bulgarian data (1999–2016). The focus is on the relative importance of consumption versus income tax...

This paper utilizes a simple general-equilibrium model to analyse the long-run effects of Bulgaria’s 2007-08 corporate-personal income tax reforms. In particular, we consider the effect working through the firm’s capital structure and argue that the new reforms incentivize firms to increase investment, as the new regime benefits retained earnings....

We introduce investment-specific technological change (ISTC) into an otherwise standard 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 then investigate the quantitative importance of the ISTC process in such a mo...

In this paper, we investigate the quantitative importance of collective bargaining agreements for the observed fluctuations in Bulgarian labor markets. Following Maffezzoli (Rev Econ Dyn 4:860–892, 2001), we introduce a monopoly union into a real-business-cycle model with government sector. We calibrate the model to Bulgarian data for the period fo...

This paper takes a simple model with pollution and environmental quality and derives some novel results. In particular, pollution is shown to be a Giffen good. This is a very important finding with clear policy implications, namely that carbon taxes (and pollution permits) are counter-productive, as they lead to increase in pollution, and instead g...

We introduce a pro-cyclical endogenous utilization rate of physical capital stock into a real business cycle model augmented with a government sector in detail. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999–2016). We investigate the quantitative importance of the endogenou...

The purpose of this paper is to describe the lottery and insurance-market equilibrium in an economy with non-convex labor supply decision, unobservable effort, and efficiency wages of the no-shirking type a la Shapiro and Stiglitz (1984). The presence of indivisible labor creates a market incompleteness, which requires that an insurance market for...

Post-crisis policy making increasingly focuses on doing business reforms. We argue that the effects of those reforms will be different across countries. To understand the reasons for the reform outcome divergence, we advance a novel firm-size distribution (FSDs)argument. At the center of the argument is the fact that FSDs are different across count...

The purpose of this note is to explore the problem of a non-convex labor supply decision in an economy with unobservable e_ort and incentive ("fair") wages a la Danthine and Kurmann (2004), and explicitly perform the aggregation presented there without a formal proof, and thus provide - starting from micro-foundations - the derivation of the expect...

This paper characterized optimal fiscal policy in the presence of pollution, and evaluated it relative to the observed one in Bulgaria. To this end, a dynamic general-equilibrium model is calibrated to Bulgarian data. The main findings are: (i) The optimal steady-state income tax rate is zero; (ii) the benevolent Ramsey planner provides 20% higher...

The purpose of this note is to explore the problem of non-convex labour supply decision in an economy with reciprocity in labour relations ("gift exchange") a la Danthine and Kurmann (2010), and explicitly perform the aggregation presented in Vasilev (2017) without a formal proof, and thus provide - starting from micro-foundations - the derivation...

The purpose of this note is to explore the problem of non-convex labor supply decision in an economy with imperfect observability of work effort, and the need to use effciency wages to prevent shirking as in Shapiro and Stiglitz 1984. In addition, the paper and explicitly performs the aggregation presented in Vasilev 2017 without a formal proof, an...

Purpose This paper shows a standard RBC model, when augmented with a VAT evasion channel, where evasion depends on the consumption tax rate, can produce a hump-shaped consumption Laffer curve. Design/methodology/approach The methodology is in the spirit of modern quantitative macroeconomic literature. Findings The model with VAT evasion can ge...

We introduce an environmental dimension into a real-business-cycle model augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999–2016). We investigate the quantitative importance of utility-enhancing environmental quality, and the mechani...

This paper describes the lottery- and insurance-market equilibrium in an economy with non-convex market-sector employment and informal sector work. In contrast to Vasilev 2016a, the discrete-continuous labor supply decision in this paper is a sequential one, and instead of home production, we focus on informal activity. The presence of non-convexit...

This paper explores the effects of fiscal policy in an economy based on indirect taxes, and one that is constrained to taxing all (labor and capital) income at the same rate. The focus of the paper is on the relative importance of consumption vs. income taxation, as well as on the provision of utility-enhancing public services. To this end, a Real-...

The purpose of this paper is to explore the problem of non-convex labor supply decision in an economy with both discrete and continuous labor decisions. In contrast to the setup in Vasilev (2016a), here each household faces a sequential labor market choice - an indivisible labor supply choice in the market sector, and conditional on non-working in...

This paper utilizes an otherwise standard micro-founded general-equilibrium setup, which is augmented with a revenue-extraction mechanism to assess the magnitude of VAT evasion. The model is calibrated to Bulgaria after the introduction of the currency board (1999-2014), as one of the very few countries in Europe with a nondifferentiated consumptio...

This paper focuses on explaining the economic fluctuations in Bulgaria after the introduction of the currency board arrangement in 1997, the period of macroeconomic stability that ensued, the EU accession, and the episode of the recent global financial crisis. This paper follows Chari et al. (2002, 2007) and performs business cycle accounting (BCA)...

This note explores the problem of family labor supply decision in an economy with two-member households, joint home production, and fixed cost of joint labor supply. Even though the labor supply decisions are not indivisible per se, the presence of such fixed cost and partners with unequal labor productivity create non-convexities. The note shows h...

This paper studies the transaction cost economizing effects of authoritarian management in organizations and systems subject to higher transaction costs originating from various sources. We analyze the nature, mechanisms and transaction cost aspects of the authoritarian management style. We argue that the higher the transaction costs of internal or...

This paper describes the lottery- and insurance-market equilibrium in an economy with non-convex private- and public-sector employment. In contrast to Vasilev 2017, 2015, the public-sector labor supply decision is a sequential one. This requires two separate insurance market to operate, one for private-sector work, and one for public-sector employm...

This paper explores the problem of non-convex labor supply decisions in an economy with both private and public sector jobs. In contrast to Vasilev (2015a), the sectoral labor choice is made in a sequential manner. Still, the micro-founded representation obtained from explicit aggregation over homogeneous individuals again features different disuti...

This note explores the problem of aggregation with non-convex labor supply decisions in an economy with both straight time and overtime. In contrast to Hansen and Sargent (1988), the paper models this as a sequential decision. Instead of changing from one to infinity, with a sequential non-convexity, the aggregate elasticity of labor supply for ove...