A business cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999–2020)

Vasilev, Aleksandar (2022) A business cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999–2020). Journal of Economic and Administrative Sciences . ISSN 1026-4116

Full content URL: https://doi.org/10.1108/JEAS-02-2022-0029

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A business cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999–2020)
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Abstract

Purpose – The author augments an otherwise standard business cycle model with a richer government sector
and adds money-in-utility (MIU) considerations to study economic fluctuations.
Design/methodology/approach – More specifically, real money balances enter in a non-separable way with
consumption and leisure. This specification is then calibrated to Bulgarian data after the introduction of the
currency board (1999–2020) gives a role to money in accentuating economic fluctuations.
Findings – This novel mechanism allows the framework to reproduce – better than the real business cycle
(RBC) model – the observed variability and correlations among model variables, and those characterizing the
labor market in particular. In addition, money is non-neutral and affects aggregate economic activity.
Originality/value – This is the first micro-founded monetary-DSGE (dynamic stochastic general equilibrium)
model on Bulgaria trying to explain the role of money for economic fluctuations.

Keywords:Business cycles, Money-in-utility (MIU) considerations, Bulgaria
Subjects:L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:48989
Deposited On:20 Apr 2022 15:22

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