An Estimated DSGE Model of the Indian Economy

A closed model DSGE model of the Indian economy is developed and it is estimated by Bayesian Maximum Likelihood methods using Dynare. A model is build up in stages to with a number of features important for emerging economies in general and the Indian economy in particular: a large proportion of credit-constrained consumers, a financial accelerator facing domestic fims seeking to finance their investment, and an informal sector. The simulation properties of the estimated model are examined under a generalized inflation targeting Taylor-type interest rate rule with forward and backward-looking components. [Working Paper No. 2011-95]. URL:[http://www.nipfp.org.in/newweb/sites/default/files/WP_2011_95.pdf].