Structural Versus Matching Estimation: Transmission Mechanisms in Armenia

CentER Discussion Paper Series No. 2011-104

25 Pages Posted: 26 Sep 2011

See all articles by Karen Poghosyan

Karen Poghosyan

Government of the Republic of Armenia - Central Bank of the Republic of Armenia

Otilia Boldea

Tilburg University, CentER

Date Written: September 22, 2011

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 using new information criteria whose econometric properties allow us to pick for both methods the 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.

Keywords: Armenia, monetary policy, structural model, GMM and MDE estimation

JEL Classification: E52, E58, C36, C52, C53

Suggested Citation

Poghosyan, Karen and Boldea, Otilia, Structural Versus Matching Estimation: Transmission Mechanisms in Armenia (September 22, 2011). CentER Discussion Paper Series No. 2011-104, Available at SSRN: https://ssrn.com/abstract=1932071 or http://dx.doi.org/10.2139/ssrn.1932071

Karen Poghosyan (Contact Author)

Government of the Republic of Armenia - Central Bank of the Republic of Armenia ( email )

6 Vazgen Sargsyan St
Yerevan, 375010
Armenia

Otilia Boldea

Tilburg University, CentER ( email )

P.O. Box 90153
Tilburg, 5000 LE
Netherlands

HOME PAGE: http://www.tilburguniversity.edu/webwijs/show/?uid=o.boldea

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