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

International Monetary Fund

No 2010/197, IMF Working Papers from 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.

Keywords: WP; open economy; Armenia; potential output; Bayesian Analysis; New Keynesian Phillips Curve; Cyclically-Adjusted Balance; Fiscal Stance; Fiscal Impulse; Automatic Stabilizers; output gap estimate; inflation expectation; estimation result; equilibrium unemployment; output gap development; Output gap; Inflation; Global (search for similar items in EconPapers)
Pages: 46
Date: 2010-08-01
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Citations: View citations in EconPapers (4)

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