An Estimated DSGE Model of the Indian Economy

Vasco Gabriel, Paul Levine (), Joseph Pearlman and Bo Yang

Working Papers from National Institute of Public Finance and Policy

Abstract: We develop a closed-economy DSGE model of the Indian economy and estimate it by Bayesian Maximum Likelihood methods using Dynare. We build up in stages to a model with a number of features important for emerging economies in general and the Indian economy in particular: a large proportion of credit-constrained consumers, a financial accelerator facing domestic firms seeking to finance their investment, and an informal sector. The simulation properties of the estimated model are examined under a generalized inflation targeting Taylor-type interest rate rule with forward and backward-looking components. We find that, in terms of model posterior probabilities and standard moments criteria, inclusion of the above financial frictions and an infor- mal sector significantly improves the model fit.

Keywords: Indian economy; DSGE model; Bayesian estimation; Monetary interest rate rules; Financial frictions (search for similar items in EconPapers)
JEL-codes: E37 E52 E58 (search for similar items in EconPapers)
Pages: 56
Date: 2011-11
New Economics Papers: this item is included in nep-cba, nep-dge, nep-iue and nep-mac
Note: Working Paper 95, 2011
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (21)

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Related works:
Working Paper: An Estimated DSGE Model of the Indian Economy (2010)
Working Paper: An Estimated DSGE Model of the Indian Economy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:npf:wpaper:11/95

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