 News, Noise and Indian Business CycleAshima Goyal and Abhishek Kumar Working Papers from eSocialSciences Abstract: New Keynesian Dynamic Stochastic General Equilibrium (DSGE) models with various specifications of technology, markup and interest rate shocks are estimated with Indian data using Kalman filter based pure and Bayesian likelihood estimation. Preference and interest rate shocks are found to be important for output determination whereas markup and interest rate shocks are important for inflation. News, such as contained in stock market variables and arising from anticipated interest rates, affects growth of gross domestic product. Interest rate shock is anticipated at horizon of one quarter and out of total variance explained by interest rate shock, one third is due to the anticipated shock. Anticipated interest rate shock diminishes the role of preference shock in output determination. Markup shock has a large share, very low persistence but is correlated. There is evidence that permanent component of technology is not well anticipated, and once we incorporate that technology shocks become more important for determination of output although it still remains much below US levels. Implications for policy are drawn out. Keywords: eSS, Dynamic Stochastic General Equilibrium (DSGE) models; India; News; Noise; Technology Shock; Learning; Anticipated Shocks; Kalman Filter; Maximum Likelihood; Inflation; Monetary Policy (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ess:wpaper:id:13041 Access Statistics for this paper More papers in Working Papers from eSocialSciences |
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