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Are Habits Important for the Propagation of Business Cycle Fluctuations in 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 introduce internal consumption habits into a real-business-cycle setup augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2016). We investigate the quantitative importance of the presence of internal consumption habits motive for the propagation cyclical uctuations in Bulgaria. Allowing for habits in consumption improves the model performance against data, and in addition this extended setup dominates the standard RBC model framework without habits, e.g., Vasilev (2009).

Keywords: Business fluctuations; consumption habits; Bulgaria (search for similar items in EconPapers)
JEL-codes: E32 E22 E37 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-dge, nep-mac and nep-tra
Date: 2018-09, Revised 2018-09
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https://www.uni-sofia.bg/index.php/eng/content/dow ... file/BEP-2018-09.pdf First version, 2018 (application/pdf)

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Working Paper: Are habits important for the propagation of business cycle fluctuations in Bulgaria? (2018) Downloads
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