General Equilibrium Model of Economy of Republic Armenia

The computable general equilibrium (CGE) models are used to analyse effects of policy changes on different aspects of economy. In the context of velvet revolution and dynamically changing economic policy in Armenia, this type of models become more relevant. There are numerous examples in literature, where CGE models for different countries and different purposes are presented. The ubiquitous model that can be used in all countries does not exist, because CGE models are developed specifically to meet the needs of each country. Armenia is not an exclusion and in this work we present a framework specifically suited for Armenia. The optimization problems of households, producers, government, bank, non-resident and traders are presented, solved and calibrated. The trajectories of household consumption, employment and deposits are found, and their precision indicates that the model can be used to analyse the reaction of households to the different changes in policy. After the calibration of producer's problem, the trajectories of output, capital, and demand for employment are found. The calibration of all parameters and the evaluation of effectiveness of model indicate that it can be а valuable tool to analyse the policy of the government of Armenia.