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A Dynamic Stochastic General Equilibrium Model for India


  • Shesadri Banerjee and Parantap Basu

    (National Council for Applied Economic Research)


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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    Cited by:

    1. Ashima Goyal & Abhishek Kumar, 2017. "A DSGE model-based analysis of the Indian slowdown," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2017-003, Indira Gandhi Institute of Development Research, Mumbai, India.
    2. Parantap Basu & Shesadri Banerjee, 2015. "Effect of Quantitative Easing on the Indian Economy: A Dynamic Stochastic General Equilibrium Perspective," CEGAP Working Papers 2015_03, Durham University Business School.
    3. Parantap Basu & Shesadri Banerjee, 2015. "Role of IST and TFP Shocks in Business Cycle Fluctuations: The Case of India," CEGAP Working Papers 2015_04, Durham University Business School.
    4. 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.

    More about this item


    DSGE; Indian Economy; IST and TFP Shocks;

    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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