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A Real-Business-Cycle Model with an Informal Sector - Lessons for Bulgaria (1999-2018)

Author

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  • Aleksandar Vasilev

    (Lincoln International Business School, UK)

Abstract

We introduce an informal sector 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 (1999-2016). We investigate the quantitative importance of the presence of a grey economy for the cyclical fluctuations in Bulgaria. We find that incorporating an informal sector improves the model fit against data, as compared to the standard RBC model, and thus this sector is an important ingredient that needs to be considered by researchers interested in business cycle-, or public finance issues.

Suggested Citation

  • Aleksandar Vasilev, 2024. "A Real-Business-Cycle Model with an Informal Sector - Lessons for Bulgaria (1999-2018)," Bulgarian Economic Papers bep-2024-01, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised Jan 2024.
    • Handle: RePEc:sko:wpaper:bep-2024-01
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    File URL: https://uni-sofia.bg/index.php/eng/content/download/302346/1963675/file/BEP-2024-01.pdf
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    References listed on IDEAS

    as
    1. Vasilev, Aleksandar, 2017. "A Real-Business-Cycle model with efficiency wages and a government sector: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 4, pages 359-377.
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    More about this item

    Keywords

    business cycles; informal sector; Bulgaria;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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