An Estimated Model with Macrofinancial Linkages for India

Author/Editor: Saxegaard, Magnus ; Anand, Rahul ; Peiris, Shanaka
Publication Date: January 01, 2010
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper develops a small open economy dynamic stochastic general-equilibrium model with macrofinancial linkages. The model includes a financial accelerator--entrepreneurs are assumed to partially finance investment using domestic and foreign currency debt--to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks. We use Bayesian estimation techniques to estimate the model using India data. The model is used to assess the importance of the financial accelerator in India and the optimality of monetary policy.
Series: Working Paper No. 10/21
Subject(s): Bank credit | Capital flows | Corporate sector | Economic models | Exchange rates | External borrowing | External financing | External shocks | Financial sector

Author's Keyword(s): monetary policy | financial accelerator | macro-financial linkages | optimal policy | bayesian estimation
Publication Date: January 01, 2010
ISBN/ISSN: 9781451962321 Format: Paper
Stock No: WPIEA2010021 Pages: 12
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