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Is Bulgarian Economy Overheating?

Listed author(s):
  • Garabed Minassian

This article presents Bulgarian economy situation by 2008, analysed in terms of some evolving inner tensions and disbalances. The individual elements’ dynamics of GDP is traced in the first part, illustrating how the economic expansion of the last decade is to be attributed to the imports of goods and services. GDP growth is predetermined by domestic demand. A steady overtaking growth at a sectorial level is recorded by an element called “adjustments” which is filled by indirect taxation. The fastest growth in the sector of industry is due to construction whereas in the services sector – to financial mediation. Such a discordance could not continue in the future, so structural adjustments linked to the overall tuning of the economy, are both possible and probable. The second part of the article studies the changes in inflation rates, employment and income. A clear positive trend of inflationary pressures emerges, which is in line with the positive development of real income of households per capita. Material and financial resources are tied up in unproductive projects which pushes domestic demand further but the latter is not met structurally by a corresponding supply. The subject of the third part is financial mediation. The lending provided by the banking system is still being held at an unreasonably high level which does not correspond to the structural characteristics of demand. In the end some conclusions are drawn for the inner structural tensions building up in the economy, accompanied by intensifying disequilibrium. There has been made an attempt to formulate adequate macroeconomic management policies with a view to preventing serious economic and financial failures from happening as a result of the overheated to a certain extent Bulgarian economy.

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Article provided by Bulgarian Academy of Sciences - Economic Research Institute in its journal Economic Thought - Special Issue in English.

Volume (Year): (2008)
Issue (Month): 7 ()
Pages: 21-46

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Handle: RePEc:bas:econth:y:2008:i:7:p:21-46
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  1. Frank Smets & Raf Wouters, 2002. "Monetary policy in an estimated stochastic dynamic general equilibrium model of the Euro area," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
  2. Patrick A. Imam, 2007. "Effect of IMF Structural Adjustment Programs on Expectations; The Case of Transition Economies," IMF Working Papers 07/261, International Monetary Fund.
  3. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-1370, November.
  4. Frank Hahn, 1985. "Money and Inflation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262580624, January.
  5. Solow,Robert M., 1998. "Monopolistic Competition and Macroeconomic Theory," Cambridge Books, Cambridge University Press, number 9780521626163, December.
  6. Smets, Frank & Wouters, Raf, 2002. "An estimated stochastic dynamic general equilibrium model of the euro area," Working Paper Series 0171, European Central Bank.
  7. Rossitsa Rangelova, 2008. "A Criticism of the Concept and Measure for Total Factor Productivity," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 30-49.
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