Search and Matching Frictions and Business Cycle Fluctuations in Bulgaria
Bulgarian Economic Papers (www.bep.bg) from St Kliment Ohridski University of Sofia, Faculty of Economics and Business Administration / Center for Economic Theories and Policies
In this paper we investigate the quantitative importance of search and matching fric- tions in Bulgarian labor markets. This is done by augmenting an otherwise standard real business cycle model a la Long and Plosser (1983) with both a two-sided costly search and fiscal policy. This introduces a strong propagation mechanism that allows the model to capture the business cycles in Bulgaria better than earlier models. The model performs well vis-a-vis data, especially along the labor market dimension, and in addition dominates the market-clearing labor market framework featured in the stan- dard RBC model, e.g Vasilev (2009), as well as the indivisible labor extension used in Hansen (1985).
Keywords: general equilibrium; unemployment and wages; business cycles; fiscal policy (search for similar items in EconPapers)
JEL-codes: D51 E24 E32 J40 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-lma and nep-mac
Date: 2016-02, Revised 2016-02
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Working Paper: Search and matching frictions and business cycle fluctuations in Bulgaria (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:sko:wpaper:bep-2016-03
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