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Structural versus matching estimation: Transmission mechanisms in Armenia

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  • Poghosyan, Karen
  • Boldea, Otilia

Abstract

Opting for structural or reduced form estimation is often hard to justify if one wants to both learn about the structure of the economy and obtain accurate predictions. In this paper, we show that using both structural and reduced form estimates simultaneously can lead to more accurate policy predictions. Our findings are based on new information criteria that allow us to pick for both estimates impulse responses that are valid and relevant for prediction. We illustrate our findings in the context of analyzing the monetary transmission mechanism for Armenia. Based on picking valid and relevant information from both structural and reduced form matching estimation, our findings suggest that the interest rate targeting and the exchange rate channel are well specified and strongly reinforce each other in promoting the recent double-digit growth Armenia experienced before the crisis.

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Bibliographic Info

Article provided by Elsevier in its journal Economic Modelling.

Volume (Year): 30 (2013)
Issue (Month): C ()
Pages: 136-148

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Handle: RePEc:eee:ecmode:v:30:y:2013:i:c:p:136-148

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Web page: http://www.elsevier.com/locate/inca/30411

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Keywords: Small open economy; Valid and relevant impulse responses; Structural and matching estimation;

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Cited by:
  1. Poghosyan, K., 2012. "Structural and reduced-form modeling and forecasting with application to Armenia," Open Access publications from Tilburg University urn:nbn:nl:ui:12-5590845, Tilburg University.

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