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

Vasilev, Aleksandar (2021) A business-cycle model with a modified cash-in-advance feature and government sector: the case of Bulgaria (1999-2018). The IUP Journal of Applied Economics, XIX (4). pp. 47-59. ISSN 0972-6861

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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 (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.

Keywords:business cycles, modi?ed cash-in-advance (CIA) constraint, Bulgaria
Subjects:L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:43918
Deposited On:22 Feb 2021 14:09

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