AIPRG conference on economy of Armenia

AIPRG will hold its conference on the economy of Armenia on June 1-2, 2013, simultaneously in Washington, DC, and Yerevan.
Advanced registration is recommended.

Dollarization of bank loans in Armenia

Armenia's economy witnessed significant dedollarization for much of the past decade, that is until it was hit hard by the unravelling global financial crisis. The foreign exchange (FX) share of commercial bank loans to private non-financial businesses declined from the mid 70s down to 50 percent by early 2007. More impressively, the FX share of loans to households declined from about 90 percent down to 20 percent in summer of 2008.


By the first quarter of 2009, the FX share of loans to both businesses and households reversed its trend. The business share is now in the mid 80s, whereas that of households has risen to the mid 30s only, as illustrated in the figure below.

I am sure that it will take some time to reverse this pattern. But in the mean time, this is likely to add to the risk (foreign exchange) of doing business in Armenia, in particular for those with Dram denominated earnings and loans in a foreign currency.


FX share of commercial bank loans to households and private non-financial businesses: Jan 2000-Feb 2013

 Data can be downloaded from here (xls).

Armenia's stubborn trade gap

Armenia's trade gap widened over time, exploding in the years of 2006-2008. While imports and exports shrank in the aftermath of the global financial crisis, a pattern consistent with the Great Trade Collapse, both roughly converged in 2012 to their pre-crisis levels. Yet, the gap remains stubbornly high and accounts for some 28 percent of GDP.
How much of this is explained by the uncompetitiveness of the country (high wage and effective exchange rates), or by the local appetite for foreign made goods? Is import substitution a promising route for growth, and can the country compete with the emerging economies?



Exports and imports in USD millions


In 2012, goods and services from the EU accounted for 27 percent of imports, Russia for 25, China for 10, and the BRICs for a combined 38 percent.

A Blessed Easter

Christ is risen from the dead. Blessed is the resurrection of Christ.

Քրիստոս յարեաւ ի մեռելոց՜ Օրհնեալ է Յարութիւնն Քրիստոսի՜
Kristos haryav ee merelots. Orhnial e Harutiunn Kristosi.

The number of Armenian citizens visiting Turkey

The number of Armenian citizens visiting Turkey has increased over the years. It has grown from about 5000 in the mid 1990s to about 70000 in recent years. But notwithstanding this dramatic growth, the number of visits pales in comparison to the pattern observed for visitors from countries in the region.



Arrivals in Turkey


For the years 1996 through 2012, the number of Armenians arriving in Turkey generally surpassed the number departing; exceptions are 2001, and 2006-2009. The cumulative number of arrivals, net of departures, a proxy for those who may have stayed behind during this period, is about 15000. To the extent that this figure does not include those who may have arrived between 1992 and 1995, 15000 may be an underestimate of how many Armenian citizens live in Turkey today. On the other hand, it may overstate the actual figure to the extent that it does not control for the possible illegal crossings into Europe; some 55,000 would-be immigrants from various nationalities illegally crossed into Greece from Turkey in 2011 (The Economist).



Arrivals in and Departures from Turkey


A glance at the figures reveals a pattern of travel to Turkey that is unique to those from Armenia. In particular, one cannot help but notice the precipitous decline in 2001 that may have begun in 2000. This pattern can be explained by the reaction of the government of Turkey to the Armenian Genocide affirmation efforts in the US in late 2000, and the official recognition in France in 2001. Unable to lash out at the US and France, it tightened visa requirements on the citizens of Armenia. In effect, it lashed out at the weakest and poorest members of the Armenian society, the desperate migrant workers and those engaged in suitcase trade.


Arrivals in Turkey by Air and Land



The reasons for traveling to Turkey have evolved over the years, and more and more of Armenia's citizens are vacationing in Turkey and touring its historic sites. In recent years, and per Turkstat, some 8000 flew to the resort town of Antalya in Turkey.

Rapid Economic Growth?

The economy continued its steady growth form the collapse in 2009 when it shrank by 14.1 percent, hit hard by the global financial crisis. It grew at an annual rate of 8 percent for the first two months of this year, following a GDP growth of 7.2 percent in 2012.
The construction sector continues to drag the economy and declined at an annual rate of 8 percent. In contrast the industrial sector more than offset this reduction by expanding by 16 percent.
While growth through February is very promising, is Armenia in a full recovery mode from the 2009 crisis and how badly will it be impacted by the ongoing rolling crises in a number of European countries?

CFP -- Armenian Economic Association 2013 Conference

The Armenian Economic Association 2013 meetings will be jointly hosted by Yerevan State University and the American University of Armenia in Yerevan on October 19-20, 2013.

Scholars, graduate students, and researchers are invited to present their research in all areas of economics and finance. Both theoretical and empirical works are welcome. The language of the conference is Armenian and English, and sessions will be organized by language and field.

Abstracts should be less than 500 words and include: title of paper, name(s) of author(s), affiliation, current position, an email address, and at least one keyword. In the abstract, please identify the research question, methods, and outcomes (obtained or expected) of the research. Deadline for abstract submissions is June 30th.

For submissions and conference information, visit http://aea.am/conferences.html.
Direct link for abstract submissions here.
Contact: annual2013 [at] aea.am

Armen Alchian (April 12, 1914 – February 19, 2013)

via Marginal Revolution by Alex Tabarrok on 2/19/13

Armen Alchian has died. Alchian was both clever and wise, an unusual combination. His 1950 paper Uncertainty, Evolution and Economic Theory applied basic insights from evolutionary theory to suggest new approaches to economic ideas. Alchian, particularly with Demsetz, began the analysis of property rights not only what property rights do but how they evolve with changing circumstances (the link goes to Alchian’s entry on this topic in the CEE). Alchian’s textbook with Allen, University Economics which became Exchange and Production, is a classic; never a bestseller among students but avidly read by masters. The Alchian-Allen theorem, sometimes called the third law of demand, continues to bedevil theorists despite its simplicity. I am a fan of his paper Costs and Outputs which generalized some ideas about production and time and inspired Fisher Black. I never met Alchian but have always profited from reading his papers and I was truly grateful and also thrilled when he blurbed my book Entrepreneurial Economics. Fred McChesney has a good appreciation including Alchian’s pioneering event study which was suppressed for national security reasons; Bob Higgs remembers Alchian’s legendary class at UCLA and here is Larry White interviewing William Allen about A Life Among the Econ his memoir of UCLA economics during its glory years.

You can find all of these works and more in Alchian’s Collected Works.

Incorporations after the Global Crisis

Armenia was particularly hit by the global financial crisis. As gleaned from the number of newly registered corporations (limited liability), Armenia has yet to fully recover. Georgia was badly impacted as well, but is making a nice recovery. Other countries too have yet to fully recover as shown in the figures below from a newly released World Bank dataset on entrepreneurship in 130 countries.

Source: extracted from xls spreadsheet downloaded from http://www.doingbusiness.org/data/exploretopics/entrepreneurship. Thank you Shushan for sharing it.

2011 Household Survey Released

The 2011 Household Integrated Living Conditions Survey was recently released by Armstat. As with previously released surveys (2004-2010), observations are aggregated at the household level and information is released for a subset of the variables. You may download the survey for free but registration is required. The survey, with select variables at the household member level, was also released (no registration required).
The survey of 7872 households is available both as an xls and sav (spss) files. See my previous post to read or convert sav files to dta (stata).
As always, links to this and other survey data on Armenia are provided in the Resources page of aea.am.

Regional relations by the numbers

Armenia is a small player in the region. It imported USD 196 million from Iran and 749 million from Russia in 2010. These are dwarfed by those of Turkey which imported 12461 and 23650 million, respectively.

FDI in 2011

FDI continued to decline in 2011. It first grew by 25 percent in the first quater (year over year), and 12 percent in Q2. But then it declined by 20 percent in Q3 and 77 percent in Q4. How much of this pattern is influenced by the slowdown in Europe?

Net FDI: 1993-2011

2010 Demographic and Health Survey released

Armenia's 2010 Demographic and Health Survey (DHS) was just released.
The DHS program surveys are nationally-representative household surveys that provide data for a wide range of indicators in the areas of population, health, and nutrition.

The DHS program surveys over 90 countries. Surveys for Armenia are available for 2000, 2005, and 2010. These can be downloaded (registration is required) from http://www.measuredhs.com/

CFP: Armenian Economic Association 2012 Conference

The Armenian Economic Association 2012 meetings will be jointly hosted by Yerevan State University and the American University of Armenia on October 13-14, 2012.

Scholars, graduate students, and researchers are invited to present their research in all areas of economics. Papers may address the Financial Crisis, well being in the Caucasus, regional trade patterns, or any other topic in economics. Both theoretical and empirical works are welcome. The language of the conference is Armenian and English, and sessions will be organized by language and field.

Abstracts should be less than 500 words and include: title of paper, name(s) of author(s), affiliation, current position, an email address, and at least one keyword. In the abstract, please identify the research question, methods, and outcomes (obtained or expected) of the research. Deadline for abstract submissions is June 30th, and the deadline for final papers is September 15th, 2012.

For submissions and conference information, visit http://aea.am/conferences.html.
Direct link for abstract submissions here.
Contact: annual2012 [at] aea.am

Paper on implications of free trade agreements

A recent paper by Jesper Jensen and David G. Tarr, entitled "Deep Trade Policy Options for Armenia: The Importance of Trade Facilitation, Services and Standards Liberalization" addresses the implication of free trade agreements for Armenia. They conclude that significant gains can result from deep trade agreements, and a small loss if agreements are limited to tariff liberalization.

The abstract is reported below and the complete paper can be accessed at http://www.economics-ejournal.org/economics/journalarticles/2012-1.

Abstract:
In this paper the authors develop an innovative 21 sector computable general equilibrium model of Armenia to assess the impact on Armenia of a Deep and Comprehensive Free Trade Agreement (DCFTA) with the EU, as well as further regional or multilateral trade policy commitments. They find that a DCFTA with the EU will likely result in substantial gains to Armenia, but they show that the gains derive from the deep aspects of the agreement. In order of importance, the sources of the gains are: (i) trade facilitation and reduction in border costs; (ii) services liberalization; and (iii) standards harmonization. A shallow agreement with the EU that focuses only on preferential tariff liberalization in goods will likely lead to small losses to Armenia primarily due to a loss of productivity from lost varieties of technologies from the Rest of the World region in manufactured products. Additional gains can be expected in the long run from an improvement in the investment climate. The authors estimate only small gains from a services agreement with the CIS countries, but significant gains from expanding services liberalization multilaterally.

A Blessed Easter

Christ is risen from the dead. Blessed is the resurrection of Christ.

Քրիստոս յարեաւ ի մեռելոց՜ Օրհնեալ է Յարութիւնն Քրիստոսի՜
Kristos haryav ee merelots. Orhnial e Harutiunn Kristosi.

Recovery of remittances

Remittances are on the rebound, and have recovered to nearly their pre-crisis levels. But they are below the levels suggested by their past trend. Russia is much of the source of these flows. Similar pattern should be observed for neighboring countries and others in the region.
For data on remittances for all countries in the world and for the years 1970 forward, see here.


Net non-commercial money transfers of individuals through commercial banks (USD millions)

Gradual economic recovery

After the major slump since the unset of the global crisis where Armenia's GDP shrank by 14 percent in 2009, the economy seems to be recovering. It is growing only at half the double digit growth rate experienced in much of the past decade, but nevertheless a very welcome pace of recovery.

Real GDP growth rates (%); 2012 is for the months of January-February












An alternative view is provided by the trend in per capita GDP (in nominal USD). But this trend is at times influenced by exchange rate fluctuations.

Per capita GDP

Global crisis and migration from Armenia

The global financial crisis continues to leave its marks on the Armenian economy as can be gleaned from migration patterns. The number of those leaving the country has been outpacing those of arrivals in recent years, with the net figure peaking at around 44,000 in 2011. This represents a reversal of the growing net inflows witnessed in the first half of the decade.

Armenia is not unique in experiencing an increase in the outflow of migrants from developing countries in the aftermath of the Crisis. And the observed pattern continues to highlight the weak recovery of the Armenian economy. While this pales in comparison to the outflow experienced in the early 1990s, it nevertheless is a source of concern. It would be good to see some research on the attributes of these migrants, and on whether this is a temporary or permanent phenomenon.



Net Departures. For greater detail on arrivals and departures, see data page (under resources) of aea.am

Season's Greetings

Happy New Year and Merry Christmas

Շնորհավոր Նոր Տարի եւ Սուրբ Ծնունդ