Indira Gandhi Institute of Development Research

About: Indira Gandhi Institute of Development Research is a facility organization based out in Mumbai, Maharashtra, India. It is known for research contribution in the topics: Monetary policy & Inflation. The organization has 307 authors who have published 1021 publications receiving 18848 citations.

Dynamic stochastic general equilibrium (DSGE) modelling in practice: identification, estimation and evaluation

Abstract: In recent years, dynamic stochastic general equilibrium (DSGE) models have come to play an increasing role in central banks, as an aid in the formulation of monetary policy (and increasingly after the global crisis, for maintaining financial stability). DSGE models, compared to other widely prevalent econometric models (such as vector autoregressive or large-scale econometric models), are less a-theoretic and with secure micro-foundations based on the optimizing behaviour of rational economic agents. Additionally, the models in spite of being strongly tied to theory, can be ‘taken to the data’ in a meaningful way. A major feature of these models is that their theoretical underpinnings lie in what has now come to be called as the New Consensus Macroeconomics (NCM). This paper concentrates on the econometric structure underpinning such models. Identification, estimation and evaluation issues are discussed at length with a special emphasis on the role of Bayesian maximum likelihood methods.

Agflation and the PDS: Some issues

Abstract: In the context of the current public policy focus on rising food prices and their implications for food security, this paper examines two major issues raised: (i) Universalization of the public distribution system; and (ii) its implications for procurement and buffer-stocks. This paper is based on the recent evidence on the profile of public distribution system, its targeted version in particular, household's reliance on the public distribution system and the open market, and its policy implications. The paper concludes that the need of the hour is not universalisation of the PDS but a revision of the food security norm, a BPL-friendly PDS and its efficient functioning.

An SVAR Approach to Evaluation of Monetary Policy in India: Solution to the Exchange Rate Puzzles in an Open Economy

Abstract: Following the exchange-rate paper by Kim and Roubini (2000), we revisit the questions on monetary policy, exchange rate delayed overshooting, the inflationary puzzle, and the weak monetary transmission mechanism; but we do so for the open Indian economy. We further incorporate a superior monetary measure, the aggregation-theoretic Divisia monetary aggregate. Our paper confirms the efficacy of the Kim and Roubini (2000) contemporaneous restriction, customized for the Indian economy, especially when compared with recursive structure, which is damaged by the price puzzle and the exchange rate puzzle. The importance of incorporating correctly measured money into the exchange rate model is illustrated, when we compare models with no-money, simple-sum monetary measures, and Divisia monetary measures. Our results are confirmed in terms of impulse response, variance decomposition analysis, and out-of-sample forecasting. In addition, we do a flip-flop variance decomposition analysis, finding two important phenomena in the Indian economy: (i) the existence of a weak link between the nominal-policy variable and real-economic activity, and (ii) the use of inflation-targeting as a primary goal of the Indian monetary authority. These two main results are robust, holding across different time period, dissimilar monetary aggregates, and diverse exogenous model designs.

Comparative assessment of energy sources for attaining Sustainable Energy Security (SES): The case of India’s residential sector

Abstract: Attaining ‘Sustainable Energy Security’ (SES) is a valid end goal of an energy policy. However, SES is a multidimensional concept which is difficult to evaluate. The aim of this paper is to undertake a comparative assessment of SES of various energy sources for the residential sector in India. The paper also intends to construct a SES Index and rank the energy sources by assessing their performance in different dimensions. The end goal is to identify the energy sources which are relatively more secure and sustainable for India. The paper uses a scoring matrix and a weighting matrix to develop a SES Index. This multidimensional index is constructed as a weighted sum of four indices representing various dimensions, viz. Availability, Affordability, Efficiency and Environmental Acceptability. A comparative assessment of six energy sources for the residential sector for urban India reveals that, firewood has the highest rank followed by LPG and electricity while kerosene has the lowest rank. However in rural India, firewood has the highest rank followed by dung cakes while LPG has the lowest rank. Sensitivity of the SES Index to variation in weights reveals that the results are mostly insensitive to +/- 10% variation in allotted weights. It is therefore important that energy policy in India should be designed in a manner, so as to promote the use of firewood and dung cakes which are relatively more ‘Available’ and ‘Affordable’ in rural areas. Along with this, emphasis should be given on design of better technologies to increase the ‘Efficiency’ and ‘Acceptability’ of these energy sources.

Global Financial Architecture: Past and Present Arguments, Advice, Action

Abstract: In the context of the formation of G-20, the paper points out the absence of reform in the global financial architecture (GFA) after the East Asian crisis, and assesses factors that can improve the chances of real reform this time. A factual assessment of various causes advanced for the global crisis, puts the main responsibility on lax regulation. Liquidity created by current account imbalances was tiny compared to endogenous amplification of liquidity in the financial sector. Emerging markets needed reserves as self-insurance in the face of volatile cross border flows. Even so global imbalances increase risk. The paper summarizes the Chimerica debate and the blocks that have stalled progress in resolving the issue. It argues that symmetric and balanced reform, at individual country and international level, is required to remove the blocks. Deeper governance reforms will make it feasible. Potential contributions of the G-20 are outlined. It is argued that India is a useful example of flexible but managed exchange rates that allowed market deepening and export growth.