A business-cycle model with a modified cash-in-advance feature and government sector: the case of Bulgaria (1999-2018)

Aleksandar Vasilev

EconStor Open Access Articles and Book Chapters, 2020, issue 4 (forthcoming), 47-59

Abstract: We augment an otherwise standard business cycle model with a richer government sector, and add a modified cash in advance (CIA) considerations. In particular, the cash in advance constraint of Cole (2020) is extended to include private investment and government consumption, and allows a proportion of total expenditure to be done using credit. This specification is then calibrated to Bulgarian data after the introduction of the currency board (1999-2018), gives a role to money in accentuating economic fluctuations. In particular, the modified CIA constraint produces a mechanism that allows the framework to reproduce better observed variability and correlations among model variables, and those characterizing the labor market in particular.

Keywords: business cycles; modified cash-in-advance (CIA) constraint; Bulgaria (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2020
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:229881

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