Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/200502
Authors: 
Vasilev, Aleksandar
Year of Publication: 
2019
Citation: 
[Journal:] Central European Journal of Economic Modelling and Econometrics [ISSN:] 2080-119X [Issue:] forthcoming
Abstract: 
We introduce consumption habits into a real-business-cycle setup augmented with a detailed government sector. We calibrate the model to Bulgarian data for the period following the introduction of the currency board arrangement (1999-2018). We investigate the quantitative importance of the presence of internal consumption habits motive for the propagation cyclical fluctuations in Bulgaria. Allowing for internal habits in household's consumption improves the model performance against data, and in addition this extended setup dominates the standard RBC model framework without habits. Therefore, the computational experiments performed in this paper suggest that habits are a quantitatively important model ingredient, which should be taken into consideration when analyzing the effects of different policies in Bulgaria. In addition, we also demonstrate that internal habits are quantitatively more important than external habits for the Bulgarian business cycle.
Subjects: 
Business fluctuations
Bulgaria
internal consumption habits
JEL: 
E22
E32
E37
Document Type: 
Article
Document Version: 
Accepted Manuscript (Postprint)

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