Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/251944 
Year of Publication: 
2022
Citation: 
[Journal:] Econometrics. Ekonometria: Advances in Applied Data Analysis [ISSN:] 2449-9994 [Volume:] 26 [Issue:] 1 (forthcoming) [Publisher:] Sciendo [Place:] Warsaw [Year:] 2022 [Pages:] 1-13
Publisher: 
Sciendo, Warsaw
Abstract: 
We augment the standard business cycle model with cash and credit goods a la Lucas and Stokey (1983, 1987), plus a modified cash-in-advance (CIA) considerations. In particular, the cash-in-advance constraint is extended to include private investment and government purchases. This specification is then calibrated to Bulgaria over 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 the household. The model generates too volatile consumption, and counter-cyclical investment, which are at serious odds with data. Overall, the model with cash and credit goods, and physical capital accumulation, does not provide a good framework to study business cycle fluctuations in Bulgaria.
Subjects: 
business cycles
cash and credit goods
modified cash-in-advance (CIA) constraint
Bulgaria
JEL: 
E32
URL of the first edition: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)
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