An Estimated DSGE Model of the Indian Economy.

Inflation Rate

1

Output

2

Consumption (Aggregate)

2    4    6    8    10

2    4    6    8    10

-1

Nominal Interest Rate

Real Wage

0

0.4

0.2

0

2    4    6    8    10

NK Model---NK Model with FA---2-sector NK Model

Figure 4: Estimated Impulse Responses to a Productivity Shock♦

^♦ Each panel plots the mean response corresponding a positive one standard deviation shock.
Each response is for a 10 quarters (2.5 years) horizon. All DSGE impulse responses are computed
simulating the vector of DSGE model parameters at the posterior mean values reported in Table 3.

47

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