Equilibrium Real Exchange Rate Model of Armenia

Vahagn Grigoryan () and Arpine Dallakyan ()
Additional contact information
Vahagn Grigoryan: Monetary Policy Department, Central Bank of Armenia
Arpine Dallakyan: Monetary Policy Department, Central Bank of Armenia
Authors registered in the RePEc Author Service: Evžen Kočenda

No 1, Working Papers from Central Bank of the Republic of Armenia

Abstract: The equilibrium real exchange rate (ERER) is one of the key indicators for assessment of the state of economic development of a country. So it is of great importance to uncover the variables that influence on the RER and to forecast RER’s future path. Like a very common technique used in the literature for developing and transition countries we also used cointegrating equations in form of a restricted single-equation model, as far as Armenia has short-run time series problem, which does not allow estimating the VEC model. After some econometric tests 4 variables out of 30 were found to have significant explaining impact on RER. They are current transfers as a ratio of GDP, capital inflow, government investments in GDP, and nominal effective exchange rate as short-run (only) variable. Thus, the only policy instrument which the authorities may use to effect the level of the ERER is government investments (perhaps also total government spending). This model has enabled to estimate short-run and long-run real exchange rates, the adjustment paths to their equilibrium levels after external shocks, and it also observes the misalignments and explains the reasons of it. Besides it was used to assess the steady-state level of appreciation, which according to this model is estimated about 5.8 % per annum based on the developments of the last five years.

Keywords: Equilibrium Real Exchange Rate; cointegration (search for similar items in EconPapers)
JEL-codes: C32 F31 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2007
New Economics Papers: this item is included in nep-ecm and nep-int
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in CBA Working Paper Series, 2007

Downloads: (external link)
https://www.cba.am/EN/panalyticalmaterialsresearches/Analytical_04.09.2014.pdf First version, 2007 (application/pdf)

Related works:
Journal Article: Export Sophistication: A Dynamic Panel Data Approach (2018)
Working Paper: Export sophistication: A dynamic panel data approach (2017)
Working Paper: Determinants of export sophistication: Evidence from Monte Carlo simulations (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ara:wpaper:001

Access Statistics for this paper

More papers in Working Papers from Central Bank of the Republic of Armenia Contact information at EDIRC.
Bibliographic data for series maintained by Davit Hovhannisyan ( this e-mail address is bad, please contact ).