Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/263004 
Year of Publication: 
2022
Citation: 
[Journal:] Journal of Mathematical Economics and Finance [ISSN:] 2458-0813 [Volume:] 8 [Issue:] 1 [Publisher:] ASERS Publishing [Place:] Craiova [Year:] 2022 [Pages:] 7-22
Publisher: 
ASERS Publishing, Craiova
Abstract: 
Financial openness is introduced into a real-business-cycle setup augmented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2020). The quantitative importance of financial openness is investigated for the stabilization of cyclical fluctuations in Bulgaria. The computational experiment performed in this paper reveals that greater financial openness increases the impact of technology shocks on output, investment, consumption, labor hours, and net exports. This amplification effect is due to the following mechanism: openness provides a cheap access to foreign funds. Unfortunately, the new results come at odds with a major empirical observation, i.e. that consumption and net exports strongly pro-cyclical; the model, however, produces a countercyclical consumption, as well as net exports. Thus, such a setup is not yet ready to be used for policy analysis.
Subjects: 
business cycles
Bulgaria
JEL: 
E32
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)
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