Asymmetric Effects of Monetary Policy on the Armenian Economy

Haykaz Igityan ()
Additional contact information
Haykaz Igityan: Monetary Policy Department, Central Bank of Armenia

No 18, Working Papers from Central Bank of Armenia

Abstract: Whether inflation and output respond symmetrically or asymmetrically to contractionary and expansionary monetary policy shock of the same size has important policy implications. This paper shows the presence of asymmetric responses in Armenian inflation and output to positive and negative monetary policy shocks of the same size by employing econometric models. Contractionary policy decreases inflation less than expansionary policy increases it. Output reacts in the opposite way. An estimated small open economy DSGE model with sticky wages and investment adjustment costs explains about half of the asymmetry observed in the monetary policy transmission mechanism. This paper finds that the main part of inflation reaction asymmetry is a result of a highly convex Phillips curve for the importers. The nonlinearities of the internal economy explain the predominant part of the asymmetry in output reaction.

Keywords: nonlinear VAR; New Keynesian Model; monetary policy; asymmetries; business cycle; expansion; recession; asymmetric effects of monetary policy (search for similar items in EconPapers)
JEL-codes: C32 E12 E32 E52 (search for similar items in EconPapers)
Pages: 58 pages
Date: 2021-03, Revised 2021-03
New Economics Papers: this item is included in nep-cba, nep-cis, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published in Russian Journal of Money and Finance, March 2021, pages 46-103
Published in CBA Working Paper Series, March 2021

Downloads: (external link)
https://rjmf.econs.online/upload/iblock/4b2/Asymme ... ry_poicy_Armenia.pdf First version, 2021 (application/pdf)
https://www.cba.am/EN/panalyticalmaterialsresearches/WP_21_3_08.pdf Revised version, 2021 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ara:wpaper:018

Access Statistics for this paper

More papers in Working Papers from Central Bank of Armenia Contact information at EDIRC.
Bibliographic data for series maintained by Davit Hovhannisyan ( this e-mail address is bad, please contact ).