Structural versus matching estimation: Transmission mechanisms in Armenia

K. Poghosyan, O. Boldea

Research output: Contribution to journalArticleScientificpeer-review

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 new information criteria that allow us to pick for both estimates 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
Pages (from-to)136-148
JournalEconomic Modelling
Volume30
DOIs
Publication statusPublished - 2013

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Prediction
Armenia
Reduced form
Transmission mechanism
Impulse response
Information criterion
Interest rates
Targeting
Monetary transmission mechanism
Exchange rates

Cite this

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author = "K. Poghosyan and O. Boldea",
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Structural versus matching estimation : Transmission mechanisms in Armenia. / Poghosyan, K.; Boldea, O.

In: Economic Modelling, Vol. 30, 2013, p. 136-148.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

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T2 - Transmission mechanisms in Armenia

AU - Poghosyan, K.

AU - Boldea, O.

PY - 2013

Y1 - 2013

N2 - 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 new information criteria that allow us to pick for both estimates 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.

AB - 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 new information criteria that allow us to pick for both estimates 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.

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DO - 10.1016/j.econmod.2012.09.008

M3 - Article

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