Effects of Business Cycle on Private Consumption in Bulgaria during the Global Financial and Economic Crisis
Effects of Business Cycle on Private Consumption in Bulgaria during the Global Financial and Economic Crisis

Summary/Abstract: The paper discusses the patterns of individual consumption in Bulgaria after 2008 and we focus our research on processes in the real sector the crisis amplified or made more resistant. We analyse the structure of household income and expenditures through tracing the dynamics of actual and potential GDP, inflation, actual and equilibrium unemployment, savings and credits of households. The basic conclusions revolve around the significant impact of the business cycle fluctuations on the structure of household income against relatively stable preferences for private consumption which is in line with the permanent income hypothesis and shows low sensitivity of households’ expenditures to the business cycle phase. The considerable increase of household deposits and very low credit activity are also cyclically driven and show that although the real GDP structure in terms of the shares of domestic and external demand is more balanced after 2008 this does not transform into better conditions for doing business and increasing employment.

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