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A small open economy model with remittances: Evidence from Armenian economy

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  • Stepanyan Ara
  • Tevosyan Anahit

Abstract

This paper develops a small open economy model with remittances. The model features short-run nominal price rigidity generated by monopolistic competition and staggered re-optimization in output and import markets. The model structure is closely related to similar models described in Svensson (2000), Gali and Monacelli (2002) and Monacelli (2005). This paper expands their model by introducing remittances. We find that this approach is closer to the Armenian economy because remittances have shaped main streams of economic developments during recent years. This paper explores desirable monetary policy rules for a small open transition economy like Armenia, with high degree of dolarisation and huge remittances from abroad.

Suggested Citation

  • Stepanyan Ara & Tevosyan Anahit, 2008. "A small open economy model with remittances: Evidence from Armenian economy," EERC Working Paper Series 08/06e, EERC Research Network, Russia and CIS.
    • Handle: RePEc:eer:wpalle:08/06e
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    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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