Armenia: The Road to Sustained Rapid Economic Growth Cross Country Evidence

The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the Armenian International Policy Research Group. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper looks at the economic progress made so far by Armenia, and evaluates its long-run prospects for growth. The paper first describes the performance of the economy and then presents regression evidence that seeks to explain why Armenia has performed relatively better than other transition economies. Given the short period of time elapsed since the start of the transition process, any meaningful estimation of long-term growth parameters for the Armenia economy is precluded. The methodology followed in this paper, will therefore consist of drawing upon past cross-country experiences of the determinants of growth to make predictions for the Armenian economy. Based on the panel regression presented, the paper concludes that Armenia could continue its rapid growth over the medium to long term assuming continuation of sound macroeconomic policies and major improvement in the financial intermediation level, which is one of the major requirements to raise the investment ratio