A Dynamic Stochastic General Equilibrium Model for India

Shesadri Banerjee and Parantap Basu
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Shesadri Banerjee: National Council of Applied Economic Research, New Delhi

No 109, NCAER Working Papers from National Council of Applied Economic Research

Abstract: Over the last decade, the Dynamic Stochastic General Equilibrium (DSGE) framework has become a workhorse for macroeconomic analysis in both academic and policy circles. Following this emerging trend, we aim to expand our research capacity in macroeconomics at NCAER by introducing a baseline DSGE model for the Indian economy. This working paper comes out as a part of this process. In this paper, we make two contributions. First, we explore the empirical regularities of the Indian business cycle and establish a few stylized facts. Second, we produce a baseline DSGE model that can serve as an analytical framework for understanding these stylized facts. The model has a small open economy feature with a clear demarcation between consumption and investment goods sectors. We simulate the model with plausible parameterization based on the DSGE literature. Our results show that the baseline model can replicate the stylized facts reasonably well.

Keywords: DSGE Modeling; IST and TFP Shocks (search for similar items in EconPapers)
JEL-codes: E2 E6 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2015-05
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Citations: View citations in EconPapers (10)

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