Structural versus Matching Estimation: Transmission Mechanisms in Armenia

K. Poghosyan, O. Boldea

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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.
Original languageEnglish
Place of PublicationTilburg
PublisherEconometrics
Volume2011-104
Publication statusPublished - 2011

Publication series

NameCentER Discussion Paper
Volume2011-104

Keywords

  • Armenia
  • monetary policy
  • structural model
  • GMM and MDE estimation
  • information criteria
  • valid and relevant IRFs

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    Poghosyan, K., & Boldea, O. (2011). Structural versus Matching Estimation: Transmission Mechanisms in Armenia. (CentER Discussion Paper; Vol. 2011-104). Econometrics.