Governor Talk - Armenia: Risk Management Approach to Price Stability: The Role of Policy Credibility


Location: Cedar Hall, HQ1-1-660


Martin Galstyan

Governor of the Central Bank of Armenia

Martin Galstyan is the Governor of the Central Bank of Armenia. Before joining the Board he held numerous executive positions at the Bank, namely; Director of research and training center in Dilijan, Head of Statistics department and the Head of reserves management.

He also teaches numerous courses at the American University of Armenia. The flagship course is the “Microeconomics of Competitiveness” which is taught in affiliation with Harvard Business School. He is the first recipient of Excellence in Teaching Award at the American University of Armenia.

Martin Galstyan holds postgraduate degree from John F. Kennedy School of Government at Harvard University.


Jihad Azour

Director Middle East and Central Asia Department, IMF

Jihad Azour is the Director of the Middle East and Central Asia Department at the International Monetary Fund where he oversees the Fund’s work in the Middle East, North Africa, Central Asia and Caucasus.

Mr. Azour served as Lebanon’s Finance Minister in 2005-08, during which time he coordinated the implementation of important reforms, including modernizing the country’s tax and customs systems. Before and since his time as finance minister, he held a wide range of positions in the private sector, including McKinsey and Booz and Co. where he was a Vice-President and Senior Executive Advisor. Prior to joining the IMF in March 2017, he was a Managing Partner at investment firm Inventis Partners.

Mr. Azour holds a PhD in International Finance and a post-graduate degree in International Economics and Finance, both from the Institut d'Etudes Politiques de Paris. He also did research on emerging economies and their integration into the global economy as a post-doctoral fellow at Harvard. Mr. Azour has published several books and articles on economic and financial issues and taught extensively.


Key Points:

  • Advocating for a paradigm change in monetary policy framework. The current approach of monetary policy as well as the associated communication strategies critically hinge on the ability of central banks to forecast the future in order to design the optimal policy responses. Forecast errors, especially in uncertain times, in addition to non-linearity could create problems. Therefore, shifting the focus from an optimal policy response based on a more probable baseline scenario to a risk management approach that relies on multiple plausible scenarios would help minimize regrets from policy errors.
  • Potential difficulties. Implementing the proposed framework comes with several challenges, including dealing with non-linearity when generating projections, building human capital, and communicating to the public the implications of shifting towards the new framework.    


“We at the central banks are not good at forecasting for good reasons. This is the reason that the key point of the new policy framework is to treat monetary policy as a risk management exercise with multiple scenarios rather than finding the best baseline forecasting” Martin Galstyan

“Situations where monetary policy has been behind the curve, including the current juncture, it is not just a bad luck but flaw in policy framework.” Martin Galstyan

“Credibility is a stock that is easy to lose and hard to gain and once you lose it the ability to bring inflating back to the target is lower because economic agents become less forward looking.” Martin Galstyan

Contributor: Fares Rawah