Fitting Armenian Data to the Simple DSGE Model with Permanent Productivity Growth

Haykaz Igityan () and Hovhannes Manukyan ()
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Haykaz Igityan: Monetary Policy Department, Central Bank of Armenia
Hovhannes Manukyan: Monetary Policy Department, Central Bank of Armenia

No 14, Working Papers from Central Bank of Armenia

Abstract: This paper discusses the evaluation of structural parameters and estimated potential economic growth of Armenia using different specifications of DSGE models. We extend the simple models so that they are consistent with a balanced steady state growth path driven by deterministic labor-augmenting technological progress. Using a Bayesian likelihood approach, paper estimates DSGE models for the Armenian economy using three macro-economic time series. As a result, the dynamics of estimated potential economic growth of the model with demand and mark-up shocks is consistent with economic stylized facts contrary to other models that have no demand and markup shocks or only have one of these shocks. Additionally, estimated potential economic growth of the model with demand and markup shocks shows high correlation with other estimates of Central Bank of Armenia. Paper then structures and estimates two specifications of simple RBC model and the estimated potential economic growth of the model with persistent permanent productivity is identical with DSGE’s one. We show that our models are able to beat Vector Autoregression (VAR) models in out-of-sample forecasting of economic growth.

Keywords: Bayesian Estimation; VAR; Real Business Cycles; DSGE (search for similar items in EconPapers)
JEL-codes: C11 C32 E12 E32 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2020-01
New Economics Papers: this item is included in nep-cis, nep-dge, nep-mac, nep-ore and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published in CBA Working Paper Series, January 2020

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https://www.cba.am/EN/panalyticalmaterialsresearches/Analytical_03.02.2020.pdf First version, 2020 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:ara:wpaper:014

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