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Technology shocks and business cycles in India.

Banerjee, S. and Basu, P. (2015) 'Technology shocks and business cycles in India.', Working Paper. Durham University Business School .


A striking stylized fact of the Indian economy is the increasing predominance of the investment specic technology shocks (IST) as opposed to total factor productivity (TFP) shocks in determining the GDP uctuations during the post liberalization era. A concurrent phenomenon is the stark increase in the relative import content in the consumption basket vis-a-vis investment. We develop an open economy dynamic stochastic general equilibrium (DSGE) model to understand the determinants of the relative importance of IST and TFP shocks. The model has standard frictions which include price stickiness, external habit formation, investment adjustment cost, and transaction cost of foreign bond holding. We nd that the relative share of import content in consumption over investment and nominal friction are crucial determinants of the relative importance of these two technology shocks.

Item Type:Monograph (Working Paper)
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Date accepted:No date available
Date deposited:06 June 2019
Date of first online publication:12 August 2015
Date first made open access:No date available

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