Estimation and Forecast of Structural Constraints of Economic Growth. Role of Macroeconomic Policy under External Shocks

Abstract This article presents a comprehensive evaluation and forecast of structural constraints for economic growth under external shocks by the example of the Republic of Armenia. The study is based on econometric modeling by the VAR method. Here, this method is applied to quarterly series of seasonally adjusted actual GDP, workforce productivity, and economic complexity index for 2006–2024. In addition, this study analyzes structural economic parameters, such as sectoral GDP pattern and technology maturity of the manufacturing sector. As shown by the pulse analysis, the shock from increased economic complexity is a statistically significant growth accelerator: the peak effect for GDP is about 0.4 p.p. in five quarters, the cumulative effect for two years is about 2.3 p.p., and the productiveness response is even stronger (the peak is 0.6 p.p. and, cumulatively, 3.5 p.p. in four quarters). Combined with a minor role of high-tech industries, the domination of the service sector increases vulnerability to external shocks and reinforces structural constraints. It has been concluded that the national macroeconomic policy should be reoriented at encouraging technology renovation and diversified exports as well as ensuring consistent productivity growth: these are key ways to mitigate shocks and expand the potential for long-term growth.