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A Dynamic Stochastic General Equilibrium Model for India

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  • Shesadri Banerjee and Parantap Basu

    (National Council for 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.

Suggested Citation

  • Shesadri Banerjee and Parantap Basu, 2015. "A Dynamic Stochastic General Equilibrium Model for India," Macroeconomics Working Papers 24975, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:macroe:24975
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    File URL: http://www.eaber.org/node/24975
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    Citations

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    Cited by:

    1. Ginn, William & Pourroy, Marc, 2022. "The contribution of food subsidy policy to monetary policy in India," Economic Modelling, Elsevier, vol. 113(C).
    2. Razo-De-Anda, Jorge Omar & Cruz-Aké, Salvador & Venegas-Martínez, Francisco, 2022. "¿Can the stock market boost economic growth? evidence from the Mexican real estate investment trust (REIT)," Panorama Económico, Escuela Superior de Economía, Instituto Politécnico Nacional, vol. 17(36), pages 9-32, Primer se.
    3. William Ginn & Marc Pourroy, 2022. "The Contribution of Food Subsidy Policy to Monetary Policy in India," Working Papers hal-02944209, HAL.
    4. Shah, Sayar Ahmad & Garg, Bhavesh, 2023. "Testing policy effectiveness during COVID-19: An NK-DSGE analysis," Journal of Asian Economics, Elsevier, vol. 84(C).
    5. Nandi, Aurodeep, 2019. "Fiscal deficit targeting alongside flexible inflation targeting: India’s fiscal policy transmission," Journal of Asian Economics, Elsevier, vol. 63(C), pages 1-18.
    6. Shesadri Banerjee & M S Mohanty, 2021. "US monetary policy and the financial channel of the exchange rate: evidence from India," BIS Working Papers 945, Bank for International Settlements.
    7. Ashima Goyal & Abhishek Kumar, 2020. "A DSGE Model-Based Analysis of the Indian Slowdown," Journal of International Commerce, Economics and Policy (JICEP), World Scientific Publishing Co. Pte. Ltd., vol. 11(01), pages 1-38, April.
    8. Parantap Basu & Shesadri Banerjee, 2015. "Effect of Quantitative Easing on the Indian Economy: A Dynamic Stochastic General Equilibrium Perspective," CEMAP Working Papers 2015_03, Durham University Business School.
    9. Parantap Basu & Shesadri Banerjee, 2015. "Role of IST and TFP Shocks in Business Cycle Fluctuations: The Case of India," CEMAP Working Papers 2015_04, Durham University Business School.
    10. Francesco Sergi, 2020. "The Standard Narrative about DSGE Models in Central Banks’ Technical Reports," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 27(2), pages 163-193, March.

    More about this item

    Keywords

    DSGE; Indian Economy; IST and TFP Shocks;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

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