<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The paper augments the standard business cycle model with cash and credit goods following Lucas and Stokey (1983, 1987), together with a modified cash-in-advance (CIA) considerations. In particular, the cash-in-advance constraint was extended to include private investment and government purchases. This specification was then calibrated to Bulgaria during 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 households. The model generates too volatile consumption, and countercyclical investment, which are at serious odds with the data. Overall, the model with cash and credit goods, and physical capital accumulation, did not provide a good framework to study business cycle fluctuations in Bulgaria.</p>
</abstract>

The paper augments the standard business cycle model with cash and credit goods following Lucas and Stokey (1983, 1987), together with a modified cash-in-advance (CIA) considerations. In particular, the cash-in-advance constraint was extended to include private investment and government purchases. This specification was then calibrated to Bulgaria during 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 households. The model generates too volatile consumption, and countercyclical investment, which are at serious odds with the data. Overall, the model with cash and credit goods, and physical capital accumulation, did not provide a good framework to study business cycle fluctuations in Bulgaria.

A Business-Cycle Model with Cash and Credit Goods and a Modified Cash-in-Advance Feature: Lessons for Bulgaria (1999-2020)

Econometrics

This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License.

The paper augments the standard business cycle model with cash and credit goods following Lucas and Stokey (1983, 1987), together with a modified...

A Business-Cycle Model with Cash and Credit Goods and a Modified Cash-in-Advance Feature: Lessons for Bulgaria (1999-2020)

Publié en ligne: 14 juin 2022

Pages: 1 - 13

DOI: https://doi.org/10.15611/eada.2022.1.01

Mots clés
business cycles, cash and credit goods, modified cash-in-advance (CIA) constraint, Bulgaria

© 2022 Aleksandar Vasilev, published by Sciendo

This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License.

A Business-Cycle Model with Cash and Credit Goods and a Modified Cash-in-Advance Feature: Lessons for Bulgaria (1999-2020)

Publié en ligne: 14 juin 2022

Pages: 1 - 13

DOI: https://doi.org/10.15611/eada.2022.1.01

Mots clésbusiness cycles, cash and credit goods, modified cash-in-advance (CIA) constraint, Bulgaria

© 2022 Aleksandar Vasilev, published by Sciendo

This work is licensed under the Creative Commons Attribution-ShareAlike 4.0 International License.

Mots clés
business cycles, cash and credit goods, modified cash-in-advance (CIA) constraint, Bulgaria