IDEAS home Printed from https://ideas.repec.org/a/eme/jeaspp/jeas-02-2022-0029.html
   My bibliography  Save this article

A business cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999–2020)

Author

Listed:
  • Aleksandar Vasilev

Abstract

Purpose - The author augments an otherwise standard business cycle model with a richer government sector and adds money-in-utility (MIU) considerations to study economic fluctuations. Design/methodology/approach - More specifically, real money balances enter in a non-separable way with consumption and leisure. This specification is then calibrated to Bulgarian data after the introduction of the currency board (1999–2020) gives a role to money in accentuating economic fluctuations. Findings - This novel mechanism allows the framework to reproduce – better than the real business cycle (RBC) model – the observed variability and correlations among model variables, and those characterizing the labor market in particular. In addition, money is non-neutral and affects aggregate economic activity. Originality/value - This is the first micro-founded monetary-DSGE (dynamic stochastic general equilibrium) model on Bulgaria trying to explain the role of money for economic fluctuations.

Suggested Citation

  • Aleksandar Vasilev, 2022. "A business cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999–2020)," Journal of Economic and Administrative Sciences, Emerald Group Publishing Limited, vol. 40(5), pages 1205-1217, April.
    • Handle: RePEc:eme:jeaspp:jeas-02-2022-0029
    DOI: 10.1108/JEAS-02-2022-0029
    as

    Download full text from publisher

    File URL: https://www.emerald.com/insight/content/doi/10.1108/JEAS-02-2022-0029/full/html?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://www.emerald.com/insight/content/doi/10.1108/JEAS-02-2022-0029/full/pdf?utm_source=repec&utm_medium=feed&utm_campaign=repec
    Download Restriction: Access to full text is restricted to subscribers
    File URL: https://libkey.io/10.1108/JEAS-02-2022-0029?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. V. V. Chari & Patrick J. Kehoe & Ellen R. McGrattan, 2000. "Sticky Price Models of the Business Cycle: Can the Contract Multiplier Solve the Persistence Problem?," Econometrica, Econometric Society, vol. 68(5), pages 1151-1180, September.
    2. Fischer, Stanley, 1972. "Keynes-Wicksell and Neoclassical Models of Money and Growth," American Economic Review, American Economic Association, vol. 62(5), pages 880-890, December.
    3. Stein, Jerome L, 1969. ""Neoclassical" and "Keynes-Wicksell" Monetary Growth Models," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(2), pages 153-171, May.
    4. Dario Cziráky & Max Gillman, 2006. "Money Demand in an EU Accession Country: A VECM Study of Croatia," Bulletin of Economic Research, Wiley Blackwell, vol. 58(2), pages 105-127, April.
    5. Christopher A. Sims, 2013. "Paper Money," American Economic Review, American Economic Association, vol. 103(2), pages 563-584, April.
    6. Vasilev, Aleksandar, 2020. "Search and matching frictions and business cycle fluctuations in Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 19(3), pages 319-340.
    7. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
    8. Paul A. Samuelson, 1958. "An Exact Consumption-Loan Model of Interest with or without the Social Contrivance of Money," Journal of Political Economy, University of Chicago Press, vol. 66(6), pages 467-467.
    9. Frederick Wallace, 1999. "Long-run neutrality of money in the Mexican economy," Applied Economics Letters, Taylor & Francis Journals, vol. 6(10), pages 637-639.
    10. Stefka Slavova, 2003. "Money demand during hyperinflation and stabilization: Bulgaria, 1991-2000," Applied Economics, Taylor & Francis Journals, vol. 35(11), pages 1303-1316.
    11. Christian Dreger & Hans-Eggert Reimers & Barbara Roffia, 2007. "Long-Run Money Demand in the New EU Member States with Exchange Rate Effects," Eastern European Economics, Taylor & Francis Journals, vol. 45(2), pages 75-94, April.
    12. Dobnik, Frauke, 2011. "Long-run Money Demand in OECD Countries – Cross-Member Cointegration," Ruhr Economic Papers 237, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    13. Vasilev, Aleksandar, 2009. "Business cycles in Bulgaria and the Baltic countries: an RBC approach," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 1(2), pages 148-170.
    14. Weber, Axel A., 1994. "Testing long-run neutrality: empirical evidence for G7-countries with special emphasis on Germany," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 41(1), pages 67-117, December.
    15. Jordan Kjosevski, 2013. "The determinants and stability of money demand in the Republic of Macedonia," Zbornik radova Ekonomskog fakulteta u Rijeci/Proceedings of Rijeka Faculty of Economics, University of Rijeka, Faculty of Economics and Business, vol. 31(1), pages 35-54.
    16. Ivars Tillers, 2004. "Money Demand in Latvia," Working Papers 2004/03, Latvijas Banka.
    17. Jordi Galí, 2015. "Monetary Policy, Inflation, and the Business Cycle: An Introduction to the New Keynesian Framework and Its Applications Second edition," Economics Books, Princeton University Press, edition 2, number 10495.
    18. Wallace, Frederick H., 2005. "Long Run Money Neutrality: The Case of Guatemala," Revista Latinoamericana de Desarrollo Economico, Carrera de Economía de la Universidad Católica Boliviana (UCB) "San Pablo", issue 5, pages 127-138, Octubre.
    19. Lucas, Robert Jr., 1982. "Interest rates and currency prices in a two-country world," Journal of Monetary Economics, Elsevier, vol. 10(3), pages 335-359.
    20. Weber, Axel A, 1994. "Testing Long-run Neutrality: Empirical Evidence for G7 Countries with Special Emphasis on Germany," CEPR Discussion Papers 1042, C.E.P.R. Discussion Papers.
    21. Aleksandar Vasilev, 2018. "A Business-cycle-model with Monopolistically-competitive Firms and Calvo Wages: The Case of Bulgaria after the Introduction of the Currency Board (1999-2016)," Bulgarian Economic Papers bep-2018-07, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised Jul 2018.
    22. Boriss Siliverstovs, 2007. "Money Demand in Estonia," Discussion Papers of DIW Berlin 675, DIW Berlin, German Institute for Economic Research.
    23. Rotemberg, Julio J & Woodford, Michael, 1996. "Real-Business-Cycle Models and the Forecastable Movements in Output, Hours, and Consumption," American Economic Review, American Economic Association, vol. 86(1), pages 71-89, March.
    24. Petrevski, Goran & Jovanovski, Kiril, 2010. "Demand for money in Macedonia," SEER Journal for Labour and Social Affairs in Eastern Europe, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 13(1), pages 121-136.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hannu Laurila, 2022. "Money as Insurance," Risks, MDPI, vol. 10(12), pages 1-13, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Vasilev, Aleksandar, 2020. "A business-cycle-model with monopolistically-competitive firms and Calvo wages: Lessons for Bulgaria (1999-2018)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Early Cit.
    2. Vasilev, Aleksandar, 2018. "A business-cycle-model with monopolistically-competitive intermediary firms and sticky nominal wages: the case of Bulgaria after the introduction of the currency board (1999-2016)," EconStor Preprints 175183, ZBW - Leibniz Information Centre for Economics.
    3. Vasilev, Aleksandar, 2022. "A business-cycle model with cash- and credit goods and a modified cash-in-advance feature: lessons for Bulgaria (1999-2020)," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 26(1 (forthc), pages 1-13.
    4. Norman Swanson & Oleg Korenok, 2006. "The Incremental Predictive Information Associated with Using Theoretical New Keynesian DSGE Models Versus Simple Linear Alternatives," Departmental Working Papers 200615, Rutgers University, Department of Economics.
    5. Siu, Henry E., 2008. "Time consistent monetary policy with endogenous price rigidity," Journal of Economic Theory, Elsevier, vol. 138(1), pages 184-210, January.
    6. Aleksandar Vasilev, 2021. "A Real-Business-Cycle model with search-and-matching frictions and efficiency ("fair") wages," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 64(2), pages 1-23.
    7. Aleksandar Vasilev, 2020. "A Real-business-cycle Model with a Stochastic Capital Share: Lessons for Bulgaria (1999–2018)," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 14(1), pages 107-121, February.
    8. Vasilev, Aleksandar, 2017. "A Real-Business-Cycle model with reciprocity in labor relations and fiscal policy: the case of Bulgaria," EconStor Preprints 156164, ZBW - Leibniz Information Centre for Economics.
    9. Vasilev, Aleksandar, 2016. "A Real-Business-Cycle model with efficiency wages and fiscal policy: the case of Bulgaria," EconStor Preprints 148413, ZBW - Leibniz Information Centre for Economics.
    10. Aleksandar Vasilev, 2017. "A Real-Business-Cycle Model with Efficiency Wages and a Government Sector: The Case of Bulgaria," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 9(4), pages 359-377, December.
    11. Vasilev, Aleksandar, 2020. "A business-cycle model with a modified cash-in-advance feature, government sector and one-period nominal wage contracts: the case of Bulgaria," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, vol. 6(1(10)), pages 19-38.
    12. Norman Swanson & Oleg Korenok, 2006. "How Sticky Is Sticky Enough? A Distributional and Impulse Response Analysis of New Keynesian DSGE Models. Extended Working Paper Version," Departmental Working Papers 200612, Rutgers University, Department of Economics.
    13. Belomestny, Denis & Krymova, Ekaterina & Polbin, Andrey, 2021. "Bayesian TVP-VARX models with time invariant long-run multipliers," Economic Modelling, Elsevier, vol. 101(C).
    14. Boriss Siliverstovs, 2008. "Dynamic modelling of the demand for money in Latvia," Baltic Journal of Economics, Baltic International Centre for Economic Policy Studies, vol. 8(1), pages 53-74, October.
    15. Aleksandar Vasilev, 2019. "Are Labor Unions Important for Business Cycle Fluctuations: Lessons from Bulgaria (1999-2016)," Bulgarian Economic Papers bep-2019-02, Faculty of Economics and Business Administration, Sofia University St Kliment Ohridski - Bulgaria // Center for Economic Theories and Policies at Sofia University St Kliment Ohridski, revised Jan 2019.
    16. Noriega, Antonio E., 2004. "Long-run monetary neutrality and the unit-root hypothesis: further international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 15(2), pages 179-197, August.
    17. Habibullah, Muzafar & Hong, Puah & Mohamed, Azali, 2001. "Testing Long-Run Neutrality of Money in Malaysia," Jurnal Ekonomi Malaysia, Faculty of Economics and Business, Universiti Kebangsaan Malaysia, vol. 35, pages 69-83.
    18. Aleksandar Vasilev, 2020. "Are labor unions important for business cycle fluctuations? Lessons from Bulgaria," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 10(1), pages 143-161, March.
    19. Aleksandar Vasilev, 2022. "A Real-Business-Cycle Model with Endogenous Discounting and a Government Sector," Notas Económicas, Faculty of Economics, University of Coimbra, issue 54, pages 73-86, July.
    20. Aleksandar Vasilev, 2023. "A business-cycle model with money and banking: the case of Bulgaria (1999–2018)," Post-Communist Economies, Taylor & Francis Journals, vol. 35(2), pages 122-133, February.

    More about this item

    Keywords

    Business cycles; Money-in-utility (MIU) considerations; Bulgaria; E32;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eme:jeaspp:jeas-02-2022-0029. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Emerald Support (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.