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The output gap-which measures the deviation of actual output from its potential-is frequently used as an indicator of slack in an economy. This paper estimates the Finnish output gap using various empirical methods. It evaluates these methods against economic history and each other by a simulated out-of-sample forecasting exercise for Finnish CPI inflation. Only two gap measures, stemming from a frequency domain approach and the Blanchard-Quah decomposition, perform better than the naïve prediction of no change in inflation-but do not improve upon a simple autoregressive forecast. The pronounced volatility of output in Finland makes it particularly difficult to estimate potential output, producing considerable uncertainty about the size (and sign) of the gap.

Input-output analysis --- Economic forecasting --- Interindustry economics --- Economics, Mathematical --- National income --- Input-output tables --- Accounting --- Inflation --- Labor --- Production and Operations Management --- Price Level --- Deflation --- Business Fluctuations --- Cycles --- Prices, Business Fluctuations, and Cycles: Forecasting and Simulation --- Macroeconomics: Production --- Unemployment: Models, Duration, Incidence, and Job Search --- Production --- Cost --- Capital and Total Factor Productivity --- Capacity --- Macroeconomics --- Labour --- income economics --- Output gap --- Potential output --- Unemployment rate --- Total factor productivity --- Prices --- Economic theory --- Unemployment --- Industrial productivity --- Finland

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The analysis in this paper suggests that import and export volume elasticities are markedly lower in oil-exporting Middle East and Central Asian countries than in non-oil countries in the region. A key implication of this finding is that a real appreciation of the exchange rate in oil-exporting countries would achieve little in terms of expenditure switching: an appreciation does not boost imports and non-oil exports constitute only a small share of GDP and total trade in these countries. Therefore, while a real appreciation lowers the current account surplus of oil-exporting countries through valuation effects, the contribution to lowering global imbalances may be more limited.

Elasticity (Economics) --- Econometric models. --- Coefficient of elasticity --- Demand elasticity --- Elasticity, Coefficient of --- Elasticity of demand --- Price elasticity of demand --- Demand (Economic theory) --- Economics --- Exports and Imports --- Macroeconomics --- Price Level --- Inflation --- Deflation --- Trade: General --- Empirical Studies of Trade --- International economics --- Trade balance --- Export prices --- Exports --- Import prices --- Imports --- Balance of trade --- Saudi Arabia

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This paper evaluates whether Georgia is ready to adopt inflation targeting (IT), a monetary policy framework that several emerging markets have adopted recently. After reviewing selected prerequisites for successfully implementing IT, the paper focuses on whether one specific precondition is in place-an empirically stable monetary transmission mechanism. Building on a baseline VAR model, it presents several extensions to explore the various channels using causality tests, impulse responses, and variance decompositions. The paper finds that once the central bank overcomes some institutional and operational weaknesses and establishes a more reliable transmission mechanism, it could adopt IT over the medium term.

Banks and Banking --- Foreign Exchange --- Inflation --- Money and Monetary Policy --- Price Level --- Deflation --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Monetary Policy --- Monetary economics --- Macroeconomics --- Currency --- Foreign exchange --- Banking --- Exchange rates --- Currencies --- Monetary aggregates --- International reserves --- Prices --- Money --- Money supply --- Foreign exchange reserves --- Georgia --- Inflation (Finance) --- Monetary policy --- Georgia (Republic) --- Economic policy.

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Starting in 2005, nontax revenue in Georgia is expected to rise significantly, in the form of transit fees for oil transported through the Baku-Tbilisi-Ceyhan Oil Pipeline. Transit fees for gas transported through the South Caucasus Pipeline are expected to start in 2007. This paper discusses (1) how much additional revenue can be expected, (2) prospects for monetizing gas that could be received as in-kind transit fees, in the light of pervasive nonpayment in the domestic gas sector, (3) the impact of these inflows on external competitiveness, (4) how to put in place appropriate reporting on these additional revenues, and (5) whether these inflows justify the creation of a special natural resource fund.

Revenue --- Gas pipelines --- Petroleum pipelines --- Petroleum --- Oil fields --- Pipelines --- Gas --- Government revenue --- Public revenue --- Finance, Public --- Taxation --- Pipe lines --- Equipment and supplies --- Transportation --- Investments: Energy --- Exports and Imports --- Infrastructure --- Public Finance --- Economic Development: Agriculture --- Natural Resources --- Energy --- Environment --- Other Primary Products --- Socialist Systems and Transitional Economies: Natural Resources --- Energy and the Macroeconomy --- Energy: General --- Business Taxes and Subsidies --- National Government Expenditures and Related Policies: General --- Trade: General --- Industry Studies: Transportation and Utilities: General --- Investment & securities --- Public finance & taxation --- International economics --- Macroeconomics --- Oil --- Oil, gas and mining taxes --- Public expenditure review --- Oil exports --- Commodities --- Taxes --- Expenditure --- International trade --- National accounts --- Petroleum industry and trade --- Expenditures, Public --- Exports --- Saving and investment --- Georgia

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Studies of the impact of trade openness on growth are based either on cross-country analysis-which lacks transparency-or case studies-which lack statistical rigor. We apply transparent econometric methods drawn from the treatment evaluation literature to make the comparison between treated (i.e., open) and control (i.e., closed) countries explicit while remaining within a unified statistical framework. First, matching estimators highlight the rather far-fetched country comparisons underlying common cross-country results. When appropriately restricting the sample, we confirm a positive and significant effect of openness on growth. Second, we apply synthetic control methods-which account for endogeneity due to unobservable heterogeneity-to countries that liberalized their trade regime and we show that trade liberalization has often had a positive effect on growth.

Exports and Imports --- Public Finance --- Economic Theory --- Demography --- Single Equation Models --- Single Variables: Cross-Sectional Models --- Spatial Models --- Treatment Effect Models --- 'Panel Data Models --- Spatio-temporal Models' --- Economic Growth of Open Economies --- Comparative Studies of Countries --- Demographic Trends, Macroeconomic Effects, and Forecasts --- Education: General --- Trade Policy --- International Trade Organizations --- National Government Expenditures and Related Policies: General --- Population & migration geography --- Education --- International economics --- Economic theory & philosophy --- Public finance & taxation --- Population growth --- Trade liberalization --- Cross country analysis --- Public expenditure review --- Population and demographics --- International trade --- Expenditure --- Population --- Commercial policy --- Economics --- Expenditures, Public --- Bolivia --- Free trade --- Econometric models.