A Real-Business-Cycle Model with Financial Liberalization: Lessons for Bulgaria (1999-2020)
Financial openness is introduced into a real-business-cycle setup aug- mented with a detailed government sector. The model is calibrated to Bulgarian data for the period following the introduction of the currency board arrangement (1999- 2020). The quantitative importance of financial openness is investigated for the stabi- lization of cyclical fluctuations in Bulgaria. The computational experiment performed in this paper reveals that greater financial openness increases the impact of technology shocks on output, investment, consumption, labor hours, and net exports. This am- plification effect is due to the following mechanism: openness provides a cheap access to foreign funds. Unfortunately, the new results come at odds with a major empirical observation, i.e. that consumption and net exports strongly pro-cyclical; the model, however, produces a countercyclical consumption, as well as net exports. Thus, such a setup is not yet ready to be used for policy analysis.
 Cakici, S. M. (2012) “Technology shocks under varying degrees for financial openness," International Review of Economics and Finance 21: 232-245.
 Holmstrom, B., and Tirole, J. (1997) “Financial intermediation, loanable funds, and the real sector," Quarterly Journal of Economics 112: 663-691.
 Kiyotaki, N. and Moore, J. (1997) “Credit cycles," Journal of Political Economy 105: 211-248.
 Mendoza, E. (1991) “Real business cycles in a small-open economy," The American Economic Review 98: 327-332.
 National Statistical Institute (2021) Aggregate Statistical Indicators. Available on-line at www.nsi.bg Accessed on Nov. 8, 2021.
 Vasilev, A. (2015a) “Welfare effects of at income tax reform: the case of Bulgaria," Eastern European Economics 53(2): 205-220.
 Vasilev, A. (2015b) “Welfare gains from the adoption of proportional taxation in a general-equilibrium model with a grey economy: the case of Bulgaria's 2008 at tax reform," Economic Change and Restructuring, 48(2): 169-185.
 Vasilev, A. (2009) “Business cycles in Bulgaria and the Baltic countries: an RBC approach," International Journal of Computational Economics and Econometrics, 1(2): 148-170.
The Copyright Transfer Form to ASERS Publishing (The Publisher)
This form refers to the manuscript, which an author(s) was accepted for publication and was signed by all the authors.
The undersigned Author(s) of the above-mentioned Paper here transfer any and all copyright-rights in and to The Paper to The Publisher. The Author(s) warrants that The Paper is based on their original work and that the undersigned has the power and authority to make and execute this assignment. It is the author's responsibility to obtain written permission to quote material that has been previously published in any form. The Publisher recognizes the retained rights noted below and grants to the above authors and employers for whom the work performed royalty-free permission to reuse their materials below. Authors may reuse all or portions of the above Paper in other works, excepting the publication of the paper in the same form. Authors may reproduce or authorize others to reproduce the above Paper for the Author's personal use or for internal company use, provided that the source and The Publisher copyright notice are mentioned, that the copies are not used in any way that implies The Publisher endorsement of a product or service of an employer, and that the copies are not offered for sale as such. Authors are permitted to grant third party requests for reprinting, republishing or other types of reuse. The Authors may make limited distribution of all or portions of the above Paper prior to publication if they inform The Publisher of the nature and extent of such limited distribution prior there to. Authors retain all proprietary rights in any process, procedure, or article of manufacture described in The Paper. This agreement becomes null and void if and only if the above paper is not accepted and published by The Publisher, or is with drawn by the author(s) before acceptance by the Publisher.