A business-cycle model with cash- and credit goods and a modified cash-in-advance feature: lessons for Bulgaria (1999-2020)

Aleksandar Vasilev

EconStor Open Access Articles and Book Chapters, 2022, vol. 26, issue 1 (forthcoming), 1-13

Abstract: We augment the standard business cycle model with cash and credit goods a la Lucas and Stokey (1983, 1987), plus a modified cash-in-advance (CIA) considerations. In particular, the cash-in-advance constraint is extended to include private investment and government purchases. This specification is then calibrated to Bulgaria over the 1999-2020 period. The presence of cash and credit goods give a role to money in accentuating economic fluctuations. In particular, the two types of goods and the modified CIA constraint produce a more sophisticated propagation mechanism, with novel trade-offs faced by the household. The model generates too volatile consumption, and counter-cyclical investment, which are at serious odds with data. Overall, the model with cash and credit goods, and physical capital accumulation, does not provide a good framework to study business cycle fluctuations in Bulgaria.

Keywords: business cycles; cash and credit goods; modified cash-in-advance (CIA) constraint; Bulgaria (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
Date: 2022
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Related works:
Journal Article: A Business-Cycle Model with Cash and Credit Goods and a Modified Cash-in-Advance Feature: Lessons for Bulgaria (1999-2020) (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:espost:251944

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