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How to use SOAP functions to get information about CBA rates Function description



What is inflation?

The National Statistics Service of the Republic of Armenia tracks time series that represent a movement of prices, i.e. price indices, for selected sectors of the Armenian economy. For the consumer market it is consumer price index, for the general economy it is GDP deflator which represents median growth of all goods and services produced in the economy; there is export price index for foreign trade, and import price index for the domestic trade, and so on. Inflation is the growth rate of any index in any particular sector of the economy and it often has a specific calculation methodology. In both all countries of the world and Armenia the term inflation is used primarily when growth rate of consumer price index is dealt with. Though it does not reflect the economy in full, it however is most perceptible to general public.

Inflation indicator: who calculates it and how?
Inflation is the growth rate of consumer price index. CPI represents a movement of prices in the consumer market.
The National Statistics Service calculates CPI on a monthly basis, looking into prices of as much as 470 items of goods and services in 10 regions of Armenia and capital Yerevan. The list of 470 items of goods and services has been a result of queries conducted among the public regarding their consumer spending. 
The detailed price index calculation methodology is available at
What is core inflation?
Core inflation is the indicator which is net of inflation on goods and services with price fluctuations, whether short-term or abrupt. The Central Bank of Armenia (CBA) calculates, on a monthly basis, core inflation indicator using the information (sub-indices) as provided from the National Statistics Service and taking the same approach for calculation. It excludes the impact of shocks, i.e. an abrupt rise or fall in fruit and vegetable prices due to weather conditions, or rise or fall in price of any commodity in the world markets, which brings about inflation or deflation when imported and consumed in Armenia. In Armenia in 2009, for example, headline inflation was 6.5 percent and core inflation was 5.3 percent. The difference of 1.2 pp involved an increase in public utility fees. In 2010 headline inflation was 9.4 percent and core inflation, 6.3 percent, and the 3.1 pp spread was attributable to prices of agricultural products having increased due to adverse weather and price-rise in global food markets. So, core inflation as calculated by the CBA is that part of headline inflation which is net of supply-side shocks. Currently, the CBA targets the 12-month headline inflation indicator and tracks core inflation indicator in order to assess the impact of aggregate demand on inflation.
The detailed core inflation calculation methodology is available in Armenian at
Types of inflation: which is the one that the CBA targets 
In measuring inflation in a consumer market several sets of indicators are applied. These can vary by periodicity – monthly, quarterly, annual. These indicators can also be for medium-run or end-period timespans. Where the March 2012 price level is compared with that of the March 2011, what we’ll see is 12-month inflation, as of end-period. Where inflation of the period January-March 2012 is compared with that of 2011, it will be an average inflation indicator against the same reference period of the previous year. Where the price level of March 2012 is compared with the price level of February 2012, this will denote a monthly inflation indicator, as of end-period. Inflation indicators vary by incidence as well – these can be headline inflation or core inflation indicators.
Out of such diversity of inflation indicators the CBA targets the 12-month inflation indicator, as of end-period. This means that each month the CBA targets the 12-month inflation indicator against the same reference month of the previous year in order to maintain the 12-month inflation within the confidence band of 4 percent ± 1.5 pp.
Why does the CBA target the 12-month and not average inflation instead?   
Suppose the CBA targets average inflation, which takes, for example, January-December of the year T+1 against the price level of the same reference period of the previous year T. T is current year, (T+1) is the next year, and (T-1) is the previous year. The average inflation calculation methodology advocates that where any price shock (e.g. an abrupt increase of international wheat prices) is reported in January of year T, having resulted in high inflation accordingly, it will be reflected in the average inflation indicator for two years in a row from January of year T until December of year T+1. After the impact of shock gradually wanes out, inflation will stabilize but average inflation indicator will still remain high. The CBA predicts high average inflation and raises interest rates, accordingly. So an expected price level will be higher in spite of the fact that the price level had been regularized already. In this case the CBA’s reaction is neither adequate nor perceptible, and may shape wrong impulses of inflation expectations. It could also mean that the CBA reacts to inflation recorded previously instead of reacting to future inflation environment.  
In the case of the 12-month inflation, that shock will be reflected in the inflation indicator for 12 months only – January of year T+1, and the 12-month inflation forecasts will reflect somehow a truer inflation environment. This will mean that the CBA reacts to the situation adequately in terms of both steering interest rates and shaping expectations.  
The start of the year 2011 was inflationary yet average inflation in December of 2010 was lower than the 12-month inflation. In the second half of 2011 inflation environment was apparently temperate and the CBA predicted a lower 12-month inflation for the upcoming period but somewhat a higher average inflation (since inflation had been higher in 2010 and early 2011). Actually, it happened what had been predicted: the 12-month inflation reached 4.7 percent and average inflation, 7.7 percent. So, when targeting average inflation, the CBA’s action today will be non-adequate to the forecast inflation environment.
Similarly, where price shock is predicted/registered for the end-year, high inflation environment will be shaped, the 12-month inflation will be high, yet that will not be reflected in the average inflation indicator to an adequate extent and will therefore remain at the low level. By tracking average inflation, the CBA will not react to high inflation environment yet this is what should be sought after. 
Which is why the 12-month inflation targeting is reasonable in order to build a monetary policy response to inflation environment, a practice used by all inflation targeter central banks.
Below are the 12-month and average inflation indicators for the period 2006-2011. At the end of the table is the arithmetic mean of those indicators; and one can see that these are almost matching in the medium-run: 
12-mth inflation
average inflation
arithmetic mean 2006-11
As well as targeting an average inflation indicator is not advisable in the monetary policy point of view, economic agents shape their perceptions of movement of prices as of end-period and not by using average inflation indicators. 


Deposit Guaranty Fund: activities

Deposit Guaranty Fund is a not-for-profit establishment that guaranties compensation of deposits of individuals and sole proprietors, thereby contributing to the stability and reliability of the Armenia’s banking sector on the whole. DGF was founded by the Central Bank of Armenia. Maximum cover of guarantied deposit is AMD 4 million for dram-denominated deposit and AMD 2 million for foreign currency-denominated deposit.
For more information please visit



1.     What are the recruitment criteria in the CBA?


Please find out in the section “Recruitment”.
2.    Who can apply for work in the Central Bank of Armenia?
Both the experienced and young specialists (people with higher education who are not required work experience) can fill the job positions of CBA.
Please find the details in the section Recruitment”.
3.    What documents are required to submit for entering the CBA?
-       Application form, which you can find in the section Job vacancies”,
-       Diploma and diploma lose leaf (Education in local/ foreign state or non-governmental certified institutions of higher education is obligatory ),
-       passport,
-       Social security card or a reference of not having a social security card,
-       military card or military exception reference
-       work record card,
-       certificate  (those who have scientific degree),
-       children’s birth certificates,
-       2 colour photos (3x4)
4.    Are there any limitations for applicants who have once failed a competitive exam to apply for another job vacancy?
There are no limitations. Everyone who is eager to work in the Central Bank of Armenia and meet the requirements mentioned in the job description are welcome to apply.
5.    Which are the holidays and memorial days in the Republic of Armenia?


In the Republic of Armenia the official holidays and memorial days are as follows:
  • December 31
  • January 01   - New Year
  • January 02
  • January 03
  • January 04 - Christmas Eve
  • January 05
  • January 06 - Christmas Day
  • January 07 - All Souls Day
  • January 28-The Army Day
  • March 08-Women's Day
  • April 24-Genocide Victims Memorial Day
  • May 01-Labour Day
  • May 09-Victory and Peace Day
  • May 28-Republic Day
  • July  05-Constitution Day
  • September 21-Independence Day



What does ‘a floating exchange rate policy’ mean and why has the CBA adopted such a policy?

As defined by an IMF report Currency Regulations and Currency Restrictions, a floating exchange rate policy means that the exchange rate is determined in the market, and any official intervention in a currency market is aimed at moderating changes in an exchange rate and preventing too much variations rather than determining its levels.


For the CBA currency policy, please refer to the information that answers why the CBA gives priority to an announced level of inflation rather than regulating of exchange rate.


Why and how average dram exchange rate is published by the CBA?
The average dram exchange rate is published by the CBA as a reference rate for the CBA, and this can virtually be used by individuals and legal persons. The dram exchange rate versus the U.S. dollar (currencies other than U.S. dollar hold minor volumes in Armenia’s currency market) is published on a basis of previous day’s average weighted exchange rates in the currency market. The dram exchange rate versus other currencies is calculated by the help of cross exchange rates.
What explains a considerable difference between the exchange rate in banks and exchange offices and the exchange rate determined by the CBA?
The average dram exchange rate is published by the CBA each day at 3:45 pm on a basis of average weighted exchange rates used in transactions by reporting entities by 2:30 pm of any given day, which normally differs from exchange rates determined by individual banks. It goes without saying that new developments in the currency market the next day may cause fluctuations in the exchange rate and thus push the average dram exchange rate to deviate.
Wouldn’t the CBA influence the exchange rate by purchasing foreign currency from the market?


To attain an inflation target the CBA implements quantitative easing by using a relevant monetary toolkit, which includes purchase and sale of foreign currency. Purchasing foreign currency by an institution such as the central bank will, naturally, increase the demand for foreign currency; but selling foreign currency by a central bank will increase the supply of foreign currency, thus affecting the exchange rate in the market.  


At the same time, however, the CBA takes an approach of a market user, which means:
· it does not interfere with free market mechanisms and carries out its activities under the market rules,
· the CBA’s involvement in the market is not large by volume nor the CBA is inclined to making considerable changes to the exchange rate or get it fixed.
These are the credentials that help us maintain that the CBA conducts a floating exchange rate policy.
Which determines the dram exchange rate fluctuations?
When a free floating exchange rate policy is adopted the exchange rate of a local currency is determined through interaction of existing supply and demand in the currency market. Where foreign exchange supply in the market has increased as a result of grown exports or broader inflow of capital, the position of the local currency is necessarily strengthening. Yet grown imports or accelerated outflow of capital will contribute to the weakening of the position of the local currency. Existing supply and demand structure in the currency market may change if they are influenced by other factors as well, which include but are not restricted to government spending, central bank interventions, changes in legislative framework with regard to currency regulation, fluctuating prices on energy resources, household expectations. The change in exchange rate can be quite lasting when it is associated with long-term factors (e.g. the appreciation of a local currency owing to sustainable economic growth), can have a seasonal character (e.g. when seasonality for imports and exports varies) and can be short-term (e.g. a short-term inflow or outflow of financial assets). 


Why the CBA prefers an announced inflation level to regulation of exchange rate?


Keeping prices stable has been the CBA’s priority since 1996 when the law on the central bank was adopted. Further, the CBA Executive Board Decision No. 122, dated July 19, 1996, regarding the CBA currency policy principles provided that the national currency, the Dram, was set as a freely floating currency.


Naturally, deciding on a regime like this was not a goal for its own sake but had a history behind it. As it is always the case with any government and/or monetary authority worldwide, the CBA also faced with a classic trichotomy of the monetary policy goals, meaning that it had to opt and effectively handle only two goals out of three – fixing the exchange rate or providing a narrow corridor for it, price stability or an independent monetary policy implementation and free movement of capital.
The countries which tried to stick to the three goals altogether proved unsuccessful and ended with a crisis. Examples are Brazil, Argentina and Russia.
One thing was obvious: inflow of capital is vital to a small economy such as Armenia in order to fund large volumes of imports, structural reforms in the economy and develop the economy further. The CBA therefore chose, as a medium-term goal, to liberalize transactions through current account and capital account, create and develop a domestic currency market and integrate its banking sector to global financial systems.
Second issue was choosing an appropriate exchange rate regime. If the CBA were to have a fixed exchange rate and exercise control over it that would have meant that it took the foreign exchange risk. Sure, this increases predictability of the exchange rate behavior to businesses and prevents them from exchange rate fluctuations on the one hand. On the other hand, however, a regime like this makes the country more vulnerable to external shocks (for instance, when inflation in partner countries spills over to the domestic market). Under such conditions though a country is open to speculative attacks, which is extremely problematic for countries suffering low levels of international reserves.
As international experience shows, a fixed exchange rate is mostly effective in a phase of fight against hyper-inflation which Armenia had already almost overcome in 1995, and the next phase was only pertinent to creating necessary conditions for long-term financial stability. On the other hand, price stability was important for getting steadier inflation expectations in the economy, enhancing trust in the Dram and contributing to overall financial stability.



The degree to which a central bank is independent is one of the criteria in the central bank management framework, and that is mostly related to the independence in implementation of monetary policy.

According to internationally accepted indices of independence, in 2013 the Cukierman and GMT indexes were estimated for the Central Bank’s independence.
The Cukierman weighted index for the Central Bank is 0.96 (out of 1.0), the Cukierman simple index, 0.92 (out of 1.0); and the GMT index, 13 (out of 16). For more information about indexes, visit the “Frequently Asked Questions” section of this site.


What is a central bank’s independence and how it is measured?

The central bank independence is an important institutional prerequisite for maintaining price stability. Studies suggest that operational independence of central banks contributes to the credibility of implemented monetary policy while enhancing the market reaction to the central bank impulses. Empirical analyses have revealed a direct relation between the central bank independence and low inflation (Cukierman A., Central Bank Strategy, Credibility and Independence; Theory and Evidence, MIT press, 1998).
There are three degrees of the central bank’s independence in terms of monetary policy implementation:
• goal independence
• target setting independence
• operational independence
Goal independence (setting the objective) is the highest degree of independence, which is granted to, for example, the U.S. Federal Reserve System. Based on economic policy priorities, however, the Fed may alter the objective. In case of Armenia, the Central Bank is not entitled with such a degree of independence: the Central Bank’s main objective is defined by the Republic of Armenia Constitution and the Law on the Central Bank. In Armenia, the independence for setting the target indicator is prescribed by the Law on the Budget. The operational independence suggests that the central bank can use its tools independently to achieve the ultimate goal. The Central Bank of Armenia has operational  independence, and this is granted to not all countries’ central banks. An example is the Bank of England which until 1998 had no independence for using tools, and it was the executive power’s competence to interfere.
How the central bank independence is measured?

There are several indexes that measure the central bank independence. These include the Alesin Index (1988), the GMT index (Grilli, Masciandaro, Tabellini) (Grilli, V., Masciandaro, D., Tabellini, G., 1991; Political and Monetary Institutions and Public Financial Policies in the Industrial Countries. 1991), the Cukierman index (1992).

The analysis for Armenia, which was carried out by Cukierman (the Cukierman Index) in 2000, sums up estimations for the Central Bank’s independence (Cukierman A., Miller J., Neyapti B., Central Bank Reform, Liberalization and Inflation in Transition Economies. An International Perspective, Journal of Monetary Economics 49, 2002).
The analysis was performed using two groups of criteria. By one group of these criteria, Armenia ranks 1st place among 23 countries of the CIS and Eastern Europe, and by the other group criteria, the country is given the second place.
Based on the 2013 estimates, the Central Bank of Armenia has maintained a high degree of independence.
The following table provides an independent assessment according to the Cukierman (the Cukierman Index) methodology:
(Legislative variables weighted index, maximum: 1.0)
(Legislative variables simple index, maximum: 1.0)
Armenia, 2000
Armenia, 2013
The Central Bank of Armenia independence was assessed in 2013 by the GMT index, which made up 13 (maximum: 16).
Economic independence
Developed countries
United Kingdom
New Zealand
CIS and other developing countries
Kyrgyz Republic
Czech Republic


Electronic Government of the Republic of Armenia

Financial System Mediator

Armenian Deposit Guarantee Fund

Armenian Card

Armenian Motorinsurers’ Bureau

National Mortgage Company

ACRA Credit Reporting

German-Armenian Fund

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