An Estimated DSGE Model of the Indian Economy.

C Tables and Figures

Calibrated parameter	Symbol	Value for India	Value for US
Discount factor	β	0.9823	0.99
Depreciation rate	δ	0.025	0.025
Formal sector FA risk premium	ΘF	1.012	_
Informal sector FA risk premium	ΘI	1.06	_
Investment adjustment cost parameter	φX	2.00	2.00

Table 1: Calibrated Parameters

Parameter	Notation	Prior distribution			Posterior distribution
		Density	Mean	S.D/df	NK Model<■
Risk aversion	σ	Normal	1.50	0.375	1.85	[1.31:2.33]
Calvo prices	ξ	Beta	0.50	0.10	0.67	[0.61:0.74]
Labour share	α	Normal	0.70	0.05	0.58	[0.52:0.64]
Preference parameter	^%	Beta	0.50	0.15	0.79	[0.70:0.88]
Substitution elasticity (varieties)	ζ	Normal	7.00	0.50	7.17	[6.40:8.02]
Interest rate rule Interest rate smoothing	^ρ	Beta	0.75	0.10	0.60	[0.55:0.66]
Feedback from expected inflation	θ	Normal	1.50	0.25	1.44	[1.06:1.77]
Feedback from past inflation	φ	Normal	0.50	0.05	0.45	[0.37:0.53]
Degree of forward-lookingness	Ψ	Beta	0.50	0.20	0.93	[0.89:0.97]
Degree of backward-lookingness	τ	Beta	0.50	0.20	0.11	[0.02:0.19]
AR(1) coefficient Technology	ρA	Beta	0.50	0.20	0.65	[0.43:0.85]
Government spending	ρG	Beta	0.50	0.20	0.92	[0.89:0.95]
Price mark-up	ρMS	Beta	0.50	0.20	0.92	[0.88:0.96]
Risk premium	ρRPS	Beta	0.50	0.20	0.70	[0.65:0.77]
Standard deviation of AR(1) innovations/I.I.		D. shocks
Technology	sd ( (A )	Inv. gamma	0.10	2.00	0.09	[0.02:0.15]
Government spending	sd ( (G )	Inv. gamma	0.50	2.00	3.72	[3.44:4.00]
Price mark-up	sd((M S)	Inv. gamma	1.16	2.00	1.53	[1.16:1.92]
Risk premium	sd((RP S)	Inv. gamma	0.10	2.00	2.10	[1.31:2.85]
Monetary policy	sd((MPS)	Inv. gamma	0.10	2.00	0.25	[0.22:0.28]
Price contract length	1~ 1 -ξ					2.56

Table 2: Priors and Posterior Estimates - US Economy

^♦ Notes: we report posterior means and 95% probability intervals (in parentheses) based on the
output of the Metropolis-Hastings Algorithm. Sample range: 1980:I to 2006:IV.

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An Estimated DSGE Model of the Indian Economy.

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