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An Estimated Model with Macrofinancial Linkages for India

Author

Listed:
  • Mr. Magnus Saxegaard
  • Rahul Anand
  • Mr. Shanaka J Peiris

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.

Suggested Citation

  • Mr. Magnus Saxegaard & Rahul Anand & Mr. Shanaka J Peiris, 2010. "An Estimated Model with Macrofinancial Linkages for India," IMF Working Papers 2010/021, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/021
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    References listed on IDEAS

    as
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    3. Nooman Rebei & Steven Ambler & Ali Dib, 2004. "Taylor Rules in an Estimated Model of a Small Open Economy," 2004 Meeting Papers 378, Society for Economic Dynamics.
    4. Bernanke, Ben S. & Gertler, Mark & Gilchrist, Simon, 1999. "The financial accelerator in a quantitative business cycle framework," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 21, pages 1341-1393, Elsevier.
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    7. Bauwens, Luc & Lubrano, Michel & Richard, Jean-Francois, 2000. "Bayesian Inference in Dynamic Econometric Models," OUP Catalogue, Oxford University Press, number 9780198773139.
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