An Estimated DSGE Model of the Indian Economy.

Virmani, V. (2004). Operationalising Taylor-type Rules for the Indian Economy: Issues and
Some Results. Indian Institute of Management Ahmedabad Working Paper 2004-07-04.

A Summary of One-Sector Model

A.1 Dynamic Model

The following summarizes the dynamic model for both one-sector models of sections 2 and
3. Note that the baseline model in section 2 puts λ = 0 and shuts down the financial
accelerator.

Λt =

ΛC2,t ⁼

ΛL,t ⁼

ΛC2,t ⁼

Λ L,t  =

ΛC2,t

Lt ^≡

C1,t =

_Cte ₌

Ct =

Y^W

^Yt   ⁼

Yt =

P^W

tJF Fh,t =

Pt

Pt =

Kt+1 ⁼

Xt ≡

Qt(1 - S(Xt) - XtS⁰(Xt)) +

Et[(1 + Rt+1)Θt+1] =

1 + Rk,t ⁼

Θt =

_(C2(1_t-%)

Λ(C2,t,Lt)=   ^2,t ₁

_Lt%₎1-σ _{- 1}

-σ

_{(1 - %)C2}(1_,t-%)(1-σ)-1_{(1 - ht)}%(1-σ)_)
%C2(1_t-%)(1-σ)_Lt%(1-σ)-1

βEt [(1 + Rt+1)ΛC₂,t+1]

Wt

Pt

1 - h_t

Wtht

Pt

1—e Nt

ξ_e

λC1_,t + (1 - λ)C2_,t + C_t^e

(At, ht, Kt) = (Atht)^αKt^1-α

(1 - c)Yt^W

PtW αY_t^w _ Wt

~~hΓ = Pf

¹ P w

^{1 - 1}

(1 - δ)Kt + (1 - S(Xt))It

It

It-1

Et

It²

(1 + Rt+1 )

Qt +ι S ( Zt+ι) -+± =1

I_t

^Et[^{1 +} Rk,t+1]

WW

(1 - ^αI ) ~Ppj~ ~Kô~ + (1 - ^δ) Qt

^Qt-1

-(QN:,..).....-(QNκ)

χ

RPSt

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