Sunday, April 26, 2009

Lecture notes

For the past couple of years was populated with links to lecture notes in economics from leading universities around the world. The goal was to provide educational materials in advance economics training. Students are able to click on links to lecture notes in advanced economic theory, trade, econometrics, IO, among others, and learn what graduate students are learning around the world. Faculty could tap into this resource in preparing their lectures and shaping their syllabuses. Most of the early beneficiaries of the posted materials were graduate students in Turkey where the economics training is more advanced. But now we're seeing more from Armenia and Georgia.

Initially the entire effort was aimed at the doctoral level, where training is yet to reach its full potential. It turned out that undergraduate students have similar needs as well. Textbooks for the most part don't really exist, and training in many fields is lacking. But undergraduate training materials pause a unique problem. Unlike graduate training which is universally undertaken/available in English, language and relevance are serious concerns. Much of these need to be in Armenian. They also need to contain examples or case studies relevant to conditions on the ground.

To date, only two lecture notes in undergraduate finance written in Armenian are posted on the server, with an average of 100 downloads per month. One can only imagine the benefits to students (and faculty), who could be located anywhere, from having access to lectures in Armenian or that related to Armenia. And so this is a call to educators out there to share their lecture notes and have them posted on (or linked to)

Friday, April 17, 2009

DSGE model for Armenia

The use of Dynamic Stochastic General Equilibrium (DSGE) models has grown among central banks in the evaluation of policy. Unlike the larger time series macro models, DSGE models are better grounded in theory.

A recent IMF working paper co-authored by an economist from the Central Bank (CBA) presents such a model for Armenia. The paper lays out the economic foundations, parameter assumptions, calibration and estimation procedures using data over 2002-2007, and a review of the accuracy of predictions.

The short history exploited in the model is a source of concern. It would have been good to use the model to predict 2008 or much earlier periods to test for prediction precision. Nevertheless, the paper is very nicely written and makes very useful addition to our understanding of the performance of the Armenian economy.

I have seen some of CBA's working papers written in Armenian. But it is good that this recent paper is made available in English which will allow for greater exposure and scrutiny.

For a review of DSGE, also known as new-Keynesian, models see here.
For an alternative view of the usefulness of such models, see American Economic Journal: Macroeconomics 2009, 1:1, 242–266. Added April 19.

Monday, April 13, 2009

Call for Contributors

With growing demands on my time I have scaled back on many endeavors including, most regrettably, cancelling plans to teach in Yerevan. And with so much to write about, the Blog can really use additional contributors.

Two contributors to the blog have been very helpful directly or on background in its success. Ara is a professor of economics in California, and worked at the Economic Institute of the Ministry of Finance and Economy of Armenia in 1991. Shushan is a fourth year PhD student in the US, and a graduate of the Yerevan State Institute of Economy; she contributed much of the lecture notes and data posted on But they too have heavy demands on their time.

Qualifications: The ideal candidate must be a professor, researcher, or an advanced graduate student. This can be a great opportunity for someone who wants to develop expertise and/or a research agenda on Armenia.

Purpose: The primary purpose of the blog is to encourage research and critical thinking. The majority of posted articles fall into one major category, namely to inform and educate. In its simplest form, a posted article may be viewed as the starting point or inspiration for a term paper, a thesis, or a research paper. Data are presented to establish a trend or a relationship between two or more variables, and an article concludes with a question or two for further research. This may seem a bit professorial but it is quite effective.

Politics: By its very nature, the government is responsible for the course of the economy. Care should be taken in making sure that critiquing policy is not the same as siding with those who oppose the government. But given that the average Armenian cannot separate economics from politics, you will not make anyone happy; just keep in mind the benefit to students and researchers.

Media: Generally, the media in Armenia is not independent; some are pro government and some oppose it. Therefore, no media outlet should be criticized directly even though most of the economy related news reported is biased (bus. related outlets such as ARKA are the exception). Foreign outlets are fair game.

Moderating: No political/partisan comments are allowed. There are some political activists who will push the envelop. The lesson learned from past experience is to draw a strict rule that would allow only comments relevant to the posted article and only if they contain some economic reasoning or shed further light on the topic.

Niche: This Blog is the only Armenia related outlet that provides data intensive analyses of economic activity. But this can be quite time consuming.

Topics: All topics listed in the header of the Blog are of interest. Armenia continues to be a blank sheet in terms of research coverage. With the exception of IMF/Worldbank economists, there is very little research visible. In addition, we know very little about the progress in economics training.

Hope you are interested in contributing. All work is voluntary, and the only compensation is the knowledge that you are helping a student or a researcher, or at the very least improving our understanding of economic activity in the country.

Please email me or just comment (not for print).

Friday, April 03, 2009

More on the Dram

This is a follow up to my March 4 post. The share of Dram denominated bank deposits dropped from 63 percent of total deposits at the end of November to 39 percent in February. Other than the fear of the uncertainties of the global financial crises, and the related flight to quality, it is not clear what else explains this trend. What is certain however is that so much Drams cannot be dumped without depressing its value. The CBA could not defend the Dram at 305 units to the USD, and perhaps should not have intervened. In early March it gave up and stopped its intervention and the value of the Dram dropped to about 365 units per USD.

Two questions: What would have happened had the CBA not intervened? The chart below may tell one story, but that is too simplistic. Second, why do econometric models of exchange rates ignore the composition of deposits and its information content?

Jan 1995-Feb 2009: Drams per USD (red) and share of Dram deposits (blue, right axis); Rsq = 0.81
Source: CBA