An Estimated DSGE Open Economy Model of the Indian Economy with Financial Frictions

Are global spillovers complementary or competitive? Need for international policy coordination

“…In India, 'rule of thumb' consumers constitute a significant proportion of households and this category of consumers comprises those who are unable to smooth consumption overtime due to the lack of access to financial services. The presence of a significant fraction of households being non-Ricardian, coupled with their inaccessibility to formal financial services should amplify the propagation of shocks in a relatively more volatile output environment of India (see Gabriel et al (2012) and Gabriel et al (2016)). The main objective of this paper, along with these features, is to uncover and evaluate the interconnections and spillover effects in the two-country setting.…”

Finance and Credit in a Model of Monetary Policy

“…F, can be thought of as total factor productivity in loan production, or a measure of the efficiency with which banks use the factors of production to produce loans. 18 We end up with a 5.6 % per year average real short-term rate; a 2.3% average collateralized external finance premium that is broadly in line with the average spread of the prime rate over the policy rate and with some 4mn employed in banks from labour force of over 500mn, so let's choose something around 1% for the share of employment in banking, we choose 1.3%. 19 The steady-state value this yields is F = 3.9.…”

The Vietnamese business cycle in an estimated small open economy New Keynesian DSGE model

“…Second, regarding the NK-DSGE model, there are various papers estimating this model for policy analysis in the developing and emerging economies [Liu and Zhang (2010), Gu et al (2014) and Dai et al (2015) for China; Elekdag et al (2005) and Choi and Hur (2015) for Korea; Sahminan et al (2017) and Gu et al (2014) for Indonesia; Ramayandi (2011) for four ASEAN countries such as Malaysia, Thailand, Indonesia and Philippines; Saxegaard et al (2010) and Gabriel et al (2016) for India; Silveira (2008) and Palma and Portugal (2014) for Brazil, Castillo et al (2013) for Peru, Medina and Soto (2007) for Chile and Steinbach et al (2009) for South Africa].…”

“…We do this because in the literature on the SOE, the US economy is typically treated as the foreign one (see Buncic and Melecky, 2008;Choi and Hur, 2015;Gabriel et al, 2016;Rees et al, 2016). All data sources are presented in the supplemental document.…”

“…Meanwhile, three US macroeconomic variables are used as the proxy for the foreign economy. We do this because in the literature on the small open economy, the US economy is typically treated as the foreign one (see Buncic and Melecky (2008), Choi and Hur (2015), Gabriel et al (2016), and Rees et al (2016)). All data sources are presented in Appendix A.…”