How important are consumer confidence shocks for the propagation of business cycles in Bulgaria?

Aleksandar Vasilev

No 19-03, LEAF Working Paper Series from University of Lincoln, Lincoln International Business School, Lincoln Economics and Finance Research Group (LEAF)

Abstract: This paper takes an otherwise standard real-business-cycle setup with government sector, and augments it with shocks to consumer confidence to study business cycle fluctuations. A surprise increase in consumer confidence generates higher utility, as the household values consumption more in that scenario. As a test case, the model is calibrated to Bulgaria after the introduction of the currency board (1999-2018). We find that shocks to consumer confidence by themselves cannot be the main driving force behind business cycle fluctuations, but when combined with technology shocks, model performance improves substantially. Therefore, allowing for additional factors, such as consumer confidence, to interact with technology shocks can be useful in explaining business cycle movements.

Keywords: consumer confidence shocks; business cycles; Bulgaria (search for similar items in EconPapers)
JEL-codes: E21 E32 E62 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-dge, nep-mac, nep-tra and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: How Important Are Consumer Confidence Shocks for the Propagation of Business Cycles in Bulgaria? (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:leafwp:1903

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