Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/175183 
Year of Publication: 
2018
Publisher: 
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften, Leibniz-Informationszentrum Wirtschaft, Kiel und Hamburg
Abstract: 
We augment an otherwise standard business cycle model with a richer government sector, and add monopolistic competition in the product market, and rigid prices, as well as rigid wages a la Calvo (1983) in the labor market. This specification with the nominal wage rigidity, when calibrated to Bulgarian data after the introduction of the currency board (1999-2016), allows the framework to reproduce better observed variability and correlations among model variables, and those characterizing the labor market in particular. As nominal wage frictions are incorporated, the variables become more persistent, especially output, capital stock, investment and consumption, which helps the model match data better.
Subjects: 
business cycles
monopolistic competition
rigid (Calvo) prices
rigid (Calvo) wages
JEL: 
D43
E32
Document Type: 
Preprint

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