A business-cycle-model with monopolistically-competitive intermediary firms and sticky nominal wages: the case of Bulgaria after the introduction of the currency board (1999-2016)

Aleksandar Vasilev

EconStor Preprints from ZBW - Leibniz Information Centre for Economics

Abstract: We augment an otherwise standard business cycle model with a richer government sector, and add monopolistic competition in the product market, and rigid prices, as well as rigid wages a la Calvo (1983) in the labor market. This specification with the nominal wage rigidity, when calibrated to Bulgarian data after the introduction of the currency board (1999-2016), allows the framework to reproduce better observed variability and correlations among model variables, and those characterizing the labor market in particular. As nominal wage frictions are incorporated, the variables become more persistent, especially output, capital stock, investment and consumption, which helps the model match data better.

Keywords: business cycles; monopolistic competition; rigid (Calvo) prices; rigid (Calvo) wages (search for similar items in EconPapers)
JEL-codes: D43 E32 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:esprep:175183

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