Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/273313 
Year of Publication: 
2022
Citation: 
[Journal:] Problems of Economic transition [ISSN:] 1557-931X [Volume:] 63 [Issue:] 10-12 [Publisher:] Taylor & Francis [Place:] London [Year:] 2022 [Pages:] 589-603
Publisher: 
Taylor & Francis, London
Abstract: 
This article takes an otherwise standard real-business-cycle setup with a 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
business cycles
JEL: 
E24
E32
Published Version’s DOI: 
Document Type: 
Article
Document Version: 
Manuscript Version (Preprint)
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