Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/204487 
Year of Publication: 
2019
Series/Report no.: 
LEAF Working Paper Series No. 19-03
Publisher: 
University of Lincoln, Lincoln International Business School, Lincoln Economics and Finance Research Group (LEAF), Lincoln
Abstract: 
This paper takes an otherwise standard real-business-cycle setup with government sector, and augments it with shocks to consumer confidence to study business cycle fluctuations. A surprise increase in consumer confidence generates higher utility, as the household values consumption more in that scenario. As a test case, the model is calibrated to Bulgaria after the introduction of the currency board (1999-2018). We find that shocks to consumer confidence by themselves cannot be the main driving force behind business cycle fluctuations, but when combined with technology shocks, model performance improves substantially. Therefore, allowing for additional factors, such as consumer confidence, to interact with technology shocks can be useful in explaining business cycle movements.
Subjects: 
consumer confidence shocks
business cycles
Bulgaria
JEL: 
E32
E62
E21
Document Type: 
Working Paper

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