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Macroeconomic Impact of the Financial Crisis on Armenia

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  • King Banaian

    () (Department of Economics, St. Cloud State University)

Abstract

As a small, open economy with a small export sector, Armenia has experienced a large amount of stress from the financial crisis. The government exited a peg-like exchange rate regime after a drain of foreign reserves. The loss of reserves was put to loss of revenues from mining exports, but can also be put to the effects of global financial crisis on remittance inflows. Worldwide, the World Bank expects remittances to fall from US$305 billion in 2008 to $290 billion in 2009. In this paper I explore the effect of global crisis on the loss of reserves supporting the monetary system. Bank balance sheets expanded rapidly and, though small relative to GDP, accepted many assets tied to real estate. Banks� asset-liability mismatches have their root cause in changes to the flow of hard currency brought on by the crisis.

Suggested Citation

  • King Banaian, 2009. "Macroeconomic Impact of the Financial Crisis on Armenia," Working Papers 2009-1, Saint Cloud State University, Department of Economics, revised 14 Aug 2009.
  • Handle: RePEc:scs:wpaper:0901
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    File URL: http://repository.stcloudstate.edu/cgi/viewcontent.cgi?article=1000&context=econ_wps
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    References listed on IDEAS

    as
    1. Holger Floerkemeier & Era Dabla-Norris, 2007. "Bank Efficiency and Market Structure; What Determines Banking Spreads in Armenia?," IMF Working Papers 07/134, International Monetary Fund.
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    More about this item

    Keywords

    Armenia; financial crisis; monetary policy; exchange rates;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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