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A business-cycle model with a modified cash-in-advance feature and government sector: the case of Bulgaria (1999-2018)

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  • Vasilev, Aleksandar

Abstract

We augment an otherwise standard business cycle model with a richer government sector, and add a modified cash in advance (CIA) considerations. In particular, the cash in advance constraint of Cole (2020) is extended to include private investment and government consumption, and allows a proportion of total expenditure to be done using credit. This specification is then calibrated to Bulgarian data after the introduction of the currency board (1999-2018), gives a role to money in accentuating economic fluctuations. In particular, the modified CIA constraint produces a mechanism that allows the framework to reproduce better observed variability and correlations among model variables, and those characterizing the labor market in particular.

Suggested Citation

  • Vasilev, Aleksandar, 2020. "A business-cycle model with a modified cash-in-advance feature and government sector: the case of Bulgaria (1999-2018)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue 4 (forthc, pages 47-59.
    • Handle: RePEc:zbw:espost:229881
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    References listed on IDEAS

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    1. Vasilev, Aleksandar, 2009. "Business cycles in Bulgaria and the Baltic countries: an RBC approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(2), pages 148-170.
    2. Vasilev, Aleksandar, 2020. "Search and matching frictions and business cycle fluctuations in Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(3), pages 319-340.
    3. Rotemberg, Julio J & Woodford, Michael, 1996. "Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption," American Economic Review, American Economic Association, vol. 86(1), pages 71-89, March.
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    More about this item

    Keywords

    business cycles; modified cash-in-advance (CIA) constraint; Bulgaria;
    All these keywords.

    JEL classification:

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

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