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A Business-cycle-model with a Modified Cash-in-advance Feature, Government Sector and Oneperiod Nominal Wage Contracts: The Case of Bulgaria

Aleksandar Vasilev

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

Abstract: We augment an otherwise standard business cycle model with a richer government sector, and add a modified cash in advance considerations, and one-period-ahead nominal wage contracts. In particular, the cash in advance constraint of Cooley and Hansen (1989) is extended to include private investment and government consumption. This specification, together with the nominal wage rigidity, when calibrated to Bulgarian data after the introduction of the currency board (1999-2016), gives a role to money in propagating economic uctuations. In addition, the combinations of these ingredients 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 constraint; one-period nominal wage contracts (search for similar items in EconPapers)
JEL-codes: E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
Date: 2018-08, Revised 2018-08
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https://www.uni-sofia.bg/index.php/eng/content/dow ... file/BEP-2018-08.pdf First version, 2018 (application/pdf)

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Working Paper: A business-cycle model with a modified cash-in-advance feature, government sector and one-period nominal wage contracts: the case of Bulgaria (2018) Downloads
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