Asymmetric Effects of Monetary Policy on the Armenian Economy

Whether inflation and output respond symmetrically or asymmetrically to the same size of contractionary expansionary monetary policy shock has important implications. This paper shows presence asymmetric responses in Armenian positive negative shocks by employing econometric models. Contractionary decreases less than increases it. Output reacts opposite way. An estimated small open economy DSGE model with sticky wages investment adjustment costs explains about half asymmetry observed transmission mechanism. finds that main part reaction is a result highly convex Phillips curve for importers. The nonlinearities internal explain predominant reaction.