Assessment of Economic Impact of Covid-19 by DSGE Model

Assessment of Economic Impact of Covid-19 by DSGE Model

Part of: GS-Prelims and GS-III – Economy

In News:

• RBI is using Dynamic Stochastic General Equilibrium (DSGE) model to assess the impact of Covid-19 and the subsequent lockdown on the Indian economy.
• DSGE modelling is a method in macroeconomics that attempts to explain economic phenomena (economic growth and business cycles) and the effects of economic policy, through econometric models based on applied general equilibrium theory and economic principles.
• RBI has considered three main economic agents, viz., households, firms and the government for the assessment.