A small open economy model with remittances: Evidence from Armenian economy

Stepanyan Ara () and Tevosyan Anahit ()

EERC Working Paper Series from EERC Research Network, Russia and CIS

Abstract: This paper develops a small open economy model with remittances. The model features short-run nominal price rigidity generated by monopolistic competition and staggered re-optimization in output and import markets. The model structure is closely related to similar models described in Svensson (2000), Gali and Monacelli (2002) and Monacelli (2005). This paper expands their model by introducing remittances. We find that this approach is closer to the Armenian economy because remittances have shaped main streams of economic developments during recent years. This paper explores desirable monetary policy rules for a small open transition economy like Armenia, with high degree of dolarisation and huge remittances from abroad.

JEL-codes: C51 E12 (search for similar items in EconPapers)
Date: 2008-11-06
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