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Estimates of the Output Gap in Armenia with Applications to Monetary and Fiscal Policy

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  • International Monetary Fund

Abstract

This paper employs several econometric techniques to estimate the Armenian output gap. The findings indicate that the output gap is significantly positive in 2007 and 2008 and decreased dramatically in 2009. The paper uses these results to estimate a New Keynesian Phillips curve for Armenia, suggesting a significant role of the output gap and inflation expectations in determining current inflation. Finally, the underlying fiscal stance over the period 2000-09 is assessed by estimating the cyclically-adjusted fiscal balance. Most of Armenia’s fiscal deficit is found to be structural. Fiscal policy, while providing counter-cyclical support in 2009, has been largely pro-cyclical in the past.

Suggested Citation

  • International Monetary Fund, 2010. "Estimates of the Output Gap in Armenia with Applications to Monetary and Fiscal Policy," IMF Working Papers 2010/197, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2010/197
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    1. Mr. Andreas Billmeier, 2004. "Ghostbusting: Which Output Gap Measure Really Matters?," IMF Working Papers 2004/146, International Monetary Fund.
    2. Paul van den Noord, 2000. "The Size and Role of Automatic Fiscal Stabilizers in the 1990s and Beyond," OECD Economics Department Working Papers 230, OECD Publishing.
    3. Clark, Peter K., 1989. "Trend reversion in real output and unemployment," Journal of Econometrics, Elsevier, vol. 40(1), pages 15-32, January.
    4. Mr. Tetsuya Konuki, 2008. "Estimating Potential Output and the Output Gap in Slovakia," IMF Working Papers 2008/275, International Monetary Fund.
    5. Olivier Jean Blanchard, 1990. "Suggestions for a New Set of Fiscal Indicators," OECD Economics Department Working Papers 79, OECD Publishing.
    6. Nienke Oomes & Oksana Dynnikova, 2006. "The Utilization-Adjusted Output Gap: Is the Russian Economy Overheating?," IMF Working Papers 2006/068, International Monetary Fund.
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    Cited by:

    1. Julia Bersch & Tara M. Sinclair, 2011. "Mongolia: Measuring the Output Gap," IMF Working Papers 2011/079, International Monetary Fund.
    2. Poghosyan, K., 2012. "Structural and reduced-form modeling and forecasting with application to Armenia," Other publications TiSEM ad1a24c3-15e6-4f04-b338-3, Tilburg University, School of Economics and Management.
    3. Julia Bersch & Tara M. Sinclair, 2014. "Statistical versus economic output gap measures: evidence from Mongolia," Economics Bulletin, AccessEcon, vol. 34(3), pages 1864-1874.
    4. Poghosyan, Karen & Boldea, Otilia, 2013. "Structural versus matching estimation: Transmission mechanisms in Armenia," Economic Modelling, Elsevier, vol. 30(C), pages 136-148.

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