An Estimated Model with Macrofinancial Linkages for India
IMF Working Papers, January 1, 2010
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- An Estimated Model with Macrofinancial Linkages for India
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Bibliographic details
- Authors: Magnus Saxegaard, Rahul Anand, Shanaka J Peiris
- Published: January 1, 2010
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451962321.001
Model overview
- Develops a small open economy dynamic stochastic general-equilibrium (DSGE) model with macrofinancial linkages.
- Incorporates a financial accelerator: entrepreneurs are assumed to partially finance investment using domestic and foreign currency debt.
- Uses the model to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks.
Estimation approach
- Employs Bayesian estimation techniques.
- Estimation is conducted using India data.
Key findings and uses
- The model is used to:
- Assess the importance of the financial accelerator in India.
- Assess the optimality of monetary policy.
Policy implications and analysis themes
- Focuses on:
- The role of macrofinancial linkages in open-economy settings.
- The interaction between financial frictions and macroeconomic dynamics.
- The assessment of optimal monetary policy in the presence of financial acceleration effects.
Subjects and keywords (as listed)
- Subjects: Consumption, Depreciation, Exchange rates, Foreign exchange, Inflation, Labor, National accounts, Prices, Self-employment
- Keywords: acquisition cost, adjustment cost parameter, bayesian estimation, capital producer, consumer welfare, Consumption, cost adjustment cost parameter, Depreciation, Exchange rates, financial accelerator, Global, Inflation, inflation volatility, inflation-if monetary policy, macro-financial linkages, monetary policy, monetary policy shock, open economy, optimal policy, rate of depreciation, reaction function, Self-employment, WP, WPI inflation