This paper estimates fiscal policy multipliers for small states using two distinct models: an empirical forecast error model with data from twenty-three across the world, and a dynamic stochastic general equilibrium (DSGE) calibrated to hypothetical state’s economy. We find that, in short term, government consumption investment are both about 0.4, on average, DSGE baseline results, they affecte...

Abstract The current financial crisis highlights the need to develop DSGE models with real-financial linkages and an active banking sector. This paper proposes a fully micro-founded framework that incorporates optimizing banks, the interbank market, and the credit market into a DSGE model, and evaluates the role of banks and financial shocks in the U.S. business cycles. We assume two types of h...

We develop a closed-economy DSGE model of the Indian economy and estimate it by Bayesian Maximum Likelihood methods using Dynare. We build up in stages to a model with a number of features important for emerging economies in general and the Indian economy in particular: a large proportion of credit-constrained consumers, a financial accelerator facing domestic firms seeking to finance their inv...