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An Estimated Model with Macrofinancial Linkages for India

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  • Magnus Saxegaard
  • Rahul Anand
  • Shanaka J. Peiris
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    Abstract

    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.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/21.

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    Length: 45
    Date of creation: 01 Jan 2010
    Date of revision:
    Handle: RePEc:imf:imfwpa:10/21

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    Related research

    Keywords: Bank credit; Capital flows; Corporate sector; Economic models; Exchange rates; External borrowing; External financing; External shocks; Financial sector; inflation; foreign currency; nominal interest rate; monetary economics; price elasticity; monetary fund; monetary policy reaction function; inflation stabilization; monetary policy rules; contractionary monetary policy; monetary policy framework; price stability; annual inflation; price level; financial stability; discount rate; foreign exchange; inflationary pressures; inflation targeting; optimal monetary policy; central bank; monetary authority; high inflation; monetary regime; lower inflation; monetary policy regimes; price inflation; monetary stabilization; monetary policies; fall in inflation; monetary management; coefficient on inflation; steady-state inflation; inflation rate; monetary targeting; money growth; nominal interest rates;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Philippe Aghion & Philippe Bacchetta & Abhijit Banerjee, 2000. "Currency Crises and Monetary Policy in an Economy with Credit Constraints," Working Papers 00.07, Swiss National Bank, Study Center Gerzensee.
    2. Steve Ambler & Ali Dib & Nooman Rebei, 2004. "Optimal Taylor Rules in an Estimated Model of a Small Open Economy," Working Papers, Bank of Canada 04-36, Bank of Canada.
    3. Paul Levine & Joseph Pearlman & Nicoletta Batini, 2009. "Monetary and Fiscal Rules in an Emerging Small Open Economy," IMF Working Papers 09/22, International Monetary Fund.
    4. Bauwens, Luc & Lubrano, Michel & Richard, Jean-Francois, 2000. "Bayesian Inference in Dynamic Econometric Models," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780198773139, October.
    5. Bernanke, B. & Gertler, M. & Gilchrist, S., 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," Working Papers, C.V. Starr Center for Applied Economics, New York University 98-03, C.V. Starr Center for Applied Economics, New York University.
    6. Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, American Economic Association, vol. 79(1), pages 14-31, March.
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    Cited by:
    1. Sudipto Mundle & N.R. Bhanumurthy & Surajit Das, 2010. "Fiscal Consolidation with High Growth A Policy Simulation Model for India," Working Papers id:2825, eSocialSciences.

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