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

Vasilev, Aleksandar (2020) A business-cycle model with a modified cash-in-advance feature, government sector and one-period nominal wage contracts: the case of Bulgaria. Journal of Mathematical Economics and Finance, 6 (1). pp. 19-38. ISSN 2458-0813

Full content URL: https://doi.org/10.14505/jmef.v6.1(10).02

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

We augment an otherwise standard business cycle model with a richer government sector, and add a modified cash in advance considerations, and one-period-
ahead nominal wage contracts. In particular, the cash in advance constraint of Cooley
and Hansen (1989) is extended to include private investment and government consumption. This specification, together with the nominal wage rigidity, when calibrated
to Bulgarian data after the introduction of the currency board (1999-2016), gives a
role to money in propagating economic fluctuations. In addition, the combinations
of these ingredients allows the framework to reproduce better observed variability and
correlations among model variables, and those characterizing the labor market in particular.

Keywords:Business cycles, one-period nominal wage contracts.
Subjects:L Social studies > L120 Microeconomics
L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:43804
Deposited On:17 Feb 2021 14:53

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