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

Aleksandar Vasilev

Journal of Economic and Administrative Sciences, 2022, vol. 40, issue 5, 1205-1217

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; E32 (search for similar items in EconPapers)
Date: 2022
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Journal Article: A business-cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999-2020) (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jeaspp:jeas-02-2022-0029

DOI: 10.1108/JEAS-02-2022-0029

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