A business cycle model with money-in-utility (MIU) and government sector: the case of Bulgaria (1999–2020)

Purpose The author augments an otherwise standard business cycle model with a richer government sector and adds money-in-utility (MIU) considerations to study economic fluctuations. Design/methodology/approach More specifically, real money balances enter in non-separable way consumption leisure. This specification is then calibrated Bulgarian data after the introduction of currency board (1999–2020) gives role accentuating Findings novel mechanism allows framework reproduce – better than (RBC) observed variability correlations among variables, those characterizing labor market particular. In addition, non-neutral affects aggregate activity. Originality/value first micro-founded monetary-DSGE (dynamic stochastic general equilibrium) on Bulgaria trying explain for