Financial Journal

p. 21-31

Authors: Samvel S. Lazaryan, Maria A. Elkina

The purpose of this article is to estimate government expenditure multiplier in the Republic of Armenia via a SVAR model. The model is evaluated using the data over the period from 2004 to 2017 and accounts for a structural break, which occurred in the year 2009. In addition, it controls for the dynamics of copper prices and output of the Russian Federation. The results indicate that the response of output to the government expenditure shock is quite strong right after the discretionary change of fiscal policy. The multiplier reaches its peak on impact with the estimated value about 3. However, there is a substantial uncertainty regarding the exact value of the multiplier and the 95 % lower bound estimate is only 0.8. Moreover, the value of the government expenditure multiplier decreases over time rather quickly. In the medium term the impact of the government expenditure shock on output is negligible. Overall, the authors conclude that government expenditure policy can be used successfully to stabilize the dynamics of output in the event of substantial recession or boom. Estimates obtained in this study do not contradict the results of previous researches dedicated to the evaluation of fiscal multipliers in the Republic of Armenia.

p. 38-52

Authors: Milyausha R. Pinskaya, Nikolay S. Milogolov, Suren F. Adamyan

The article analyzes domestic tax legislation of the Republic of Armenia and main countries investing in Armenia in combination with double tax treaties concluded between Armenia and these countries. The aim of such analysis is to find out the riskiest double tax treaties in terms of tax treaty shopping potential. Research approach is based on assessment of indicator characterizing country position in the global investment and capital flows comparing to the main countries investing in Armenia. This indicator is determined as ratio of foreign direct investment to gross domestic product. Based on this assessment countries-investors were divided to two groups according to the level of tax base erosion risk. The article further presents the detailed analysis of national legislation and double tax treaties with these countries. Moreover, the authors discuss international experience of developing legal approaches towards addressing the issue of tax treaty abuse, such as Principle Purpose Test, Limitation of Benefits Rule and Concept of Beneficial Owner of Income. The authors also analyze international experience of formulating the criteria of assessment of necessary conditions for obtaining tax treaty benefits. These approaches can be used for development of international tax policy in the Republic of Armenia with the aim of defending its sovereign tax base and creating certain and sustainable business and tax rules for foreign investors and domestic taxpayers expanding overseas.

p. 62-75

Authors: Vsevolod Y. Cherkasov, Julia A. Maklakova

The article considers financial dollarization as one of the distinctive features of the Armenian economy. During the time of currency sovereignty, the country systematically pursued a policy of dedollarization. Various traditionally recommended tools have been applied, including legislative measures, stabilization of domestic prices, differentiation of required reserve ratios and deposit guarantees. Nevertheless, the level of dollarization remains high. The article analyzes its structural causes (labor migration, diaspora, persistent trade deficit). The structural policy gap affects the effectiveness of monetary policy in Armenia conducted within inflation targeting framework, which detailed review is also given in the article. The authors assume that targeted measures toward dedollarization should be supported by comprehensive policy of the Armenian economy competitiveness increase as envisaged by the ongoing medium-term program of national development.

p. 90-102

Authors: Igor A. Yakovlev, Kristina V. Shvandar

The goal of this article is to show how the financial market of Armenia is arranged at the moment with short descriptions of the historical path of its development, explaining how past difficulties were solved and what problems still need to be addressed. The country’s banking system demonstrates high capital adequacy and liquidity ratios, while the infrastructure of organized market for trading in financial assets meets the best world standards. However, the volume of bank loans to the economy still does not reach 50 % of GDP; the capitalization of the stock market and the turnover of corporate bonds show the modest market capacity. Enhance of the securities market, primarily corporate bonds market would facilitate the increase in contribution of the financial market to the national economic development of Armenia. Joint efforts of the authorities and the market have done much for the development of the trade and depository block, improvement of the regulatory framework, enlargement of the investors community. In the final part of the article the authors present their considerations on the essential components of a further work on the development of the Armenian stock market.

p. 115-120

Authors: Edgar А. Mkrtchyan, Sveta А. Harosyan, Gor А. Hakobyan

The article focuses on Performance Budgeting (PB), one of the most common reforms of public finance management (PFM) in developing countries over the last years. Result based budgeting reforms aim to move from article control to objectives and results in order to increase accountability and operational efficiency. The introduction to the program budgeting preliminary procedures have started in Armenia since 2003. During 2005–2017 budget instruments and methods, conceptual and methodological issues and challenges have been repeatedly reviewed and approved.