A business-cycle model with money and banking: the case of Bulgaria (1999–2018)

Vasilev, Aleksandar (2022) A business-cycle model with money and banking: the case of Bulgaria (1999–2018). Post-Communist Economies . pp. 1-12. ISSN 1463-1377

Full content URL: https://doi.org/10.1080/14631377.2022.2106922

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A business-cycle model with money and banking: the case of Bulgaria (1999–2018)
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Abstract

We augment an otherwise standard business cycle model with a richer government sector and add modified cash in advance (CIA) and deposit considerations. In particular, both the cash in advance and deposit constraints of in earlier work are extended to include private investment and government consumption. Also, part of the purchases are made using credit. This specification is then calibrated to Bulgarian data after the introduction of the currency board (1999–2020), gives a role to money and costly credit in accentuating economic fluctuations. In particular, the modified CIA constraint combines monetary with banking theory, and thus produces a novel mechanism that allows the framework to reproduce better observed variability and correlations among model variables, and those characterising the labour market in particular.

Keywords:business cycles, deposit constraint
Subjects:L Social studies > L110 Applied Economics
L Social studies > L130 Macroeconomics
Divisions:Lincoln International Business School
ID Code:50466
Deposited On:26 Aug 2022 15:41

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