Exchange Rate, Money, and Wages: What is Driving Prices in Armenia?

 
Author/Editor: Grigorian, David A. ; Khachatryan, Armine ; Sargsyan, Grigor
 
Publication Date: December 01, 2004
 
Electronic Access: Free Full text (PDF file size is 2,982KB).
Use the free Adobe Acrobat Reader to view this PDF file

 
Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper is the first attempt to look at inflation dynamics and monetary transmission mechanisms in Armenia in the context of a full information model containing three interrelated markets: foreign exchange, money, and labor. Using the vector error correction model (VECM) approach, we find that the exchange rate pass-through to prices is very strong relative to credit, wage, and interest rate channels. The analysis suggests a relatively fast adjustment of prices to long-run disequilibria in the exchange rate market, albeit with initial overshooting of the price level. In addition, we find no evidence of prices responding to changes in money and wages in a statistically significant manner.
 
Series: Working Paper No. 04/229
Subject(s): Price adjustments | Armenia | Exchange markets | Wages | Money markets | Labor markets | Economic models

Author's Keyword(s): Armenia | price dynamics | error correction model
 
English
Publication Date: December 01, 2004
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2292004 Pages: 29
Price:
US$15.00 (Academic Rate:
US$15.00 )
 
 
Please address any questions about this title to publications@imf.org