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A business-cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999-2020)

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  • Vasilev, Aleksandar

Abstract

Purpose: We augment an otherwise standard business cycle model with a richer government sector, and add 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 Bulgarian data after the introduction of the currency board (1999-2020), gives a role to money in accentuating economic fluctuations. Findings: This novel mechanism allows the framework to reproduce - better than the RBC model - the observed variability and correlations among model variables, and those characterizing the labor market in particular. In addition, money is non-neutral and affects aggregate economic activity. Originality: This is the first micro-founded monetary-DSGE model on Bulgaria trying to explain the role of money for economic fluctuations.

Suggested Citation

  • Vasilev, Aleksandar, 2022. "A business-cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999-2020)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 0(forthcomi).
    • Handle: RePEc:zbw:espost:251948
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    More about this item

    Keywords

    business cycles; money-in-utility (MIU) considerations;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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