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 |
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.
42
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