An Estimated DSGE Model of the Indian Economy

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

No 1210, School of Economics Discussion Papers from School of Economics, University of Surrey

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 informal 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: 55 pages
Date: 2010-09
New Economics Papers: this item is included in nep-cba, nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Related works:
Working Paper: An Estimated DSGE Model of the Indian Economy (2011)
Working Paper: An Estimated DSGE Model of the Indian Economy (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:sur:surrec:1210

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