An RBC model with non-Ricardian households: Lessons for Bulgaria (1999-2018)

Aleksandar Vasilev

EconStor Open Access Articles and Book Chapters, 2020, issue Forthcoming

Abstract: Purpose: We introduce non-Ricardian ("hand-to-mouth") myopic agents into an otherwise standard real-business-cycle (RBC) setup augmented with a detailed government sector.We investigate the quantitative importance of the presence of non-optimizing households for cyclical fluctuations in Bulgaria. Design Methodology/approach: We calibrate the RBC model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2018). Findings: We find that the inclusion of such non-Ricardian households improves model performance along several dimensions and generally provides a better match vis-a-vis data, as compared to the standard model populated with Ricardian agents only. Originality/value: This is a novel finding in the macroeconomic studies on Bulgaria using modern quantitative methods.

Keywords: business cycles; non-Ricardian households; hand-to-mouth; myopic behavior; Bulgaria (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:222985

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