Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/227503 
Year of Publication: 
2020
Citation: 
[Journal:] Journal of Economics and Development [ISSN:] 1859-0020 [Issue:] Early Cite [Publisher:] Emerald [Place:] Bingley [Year:] 2020
Publisher: 
Emerald, Bingley
Abstract: 
Purpose: We augment an otherwise standard business cycle model with a rich 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.Purpose: We augment an otherwise standard business cycle model with a rich 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. Design/Methodology/Approach: This specification with the nominal wage rigidity,when calibrated to Bulgarian data after the introduction of the currency board (1999-2018), allows the framework to reproduce better observed variability and correlations among model variables, and those characterizing the labor market in particular. Findings: 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, as compared to a setup without rigidities. Originality/value: The computational experiments performed in this paper suggest that wage rigidities are a quantitatively important model ingredient, which should be taken into consideration when analysing the effects of different policies in Bulgaria, which is a novel result.
Subjects: 
business cycles
monopolistic competition
rigid (Calvo) prices
rigid (Calvo) wages
JEL: 
E32
D43
D58
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Accepted Version (Postprint)
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