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This paper investigates various output gap measures in a simple inflation forecasting framework. Reflecting the cyclical position of an economy, an (unobservable) output gap has important implications for economic analysis. I construct and compare common output gap measures for five European countries. Since output above potential reflects domestic inflationary pressures, including a gap could improve the accuracy of autoregressive inflation forecasting. This assertion is tested in a simple simulated out-of-sample forecasting exercise for the period 1990-2002. The main conclusions are that an output gap rarely provides useful information and that there is no single best output gap measure across countries.
Inflation (Finance) --- Monetary policy --- Economic forecasting --- Econometric models. --- Inflation --- Labor --- Forecasting --- Production and Operations Management --- Macroeconomics: Production --- Forecasting and Other Model Applications --- Unemployment: Models, Duration, Incidence, and Job Search --- Price Level --- Deflation --- Macroeconomics --- Economic Forecasting --- Labour --- income economics --- Output gap --- Potential output --- Unemployment rate --- Production --- Economic theory --- Unemployment --- Prices --- United Kingdom
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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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Exchange rate targeting is considered the best policy option in dollarized economies when wages and prices are indexed to the exchange rate. Croatia is a highly dollarized economy, but empirical investigation conducted in this paper shows that exchange rate pass-through has been low after stabilization. This finding, which is robust to different methodologies (VAR, cointegration), would suggest that dollarization is mostly limited to financial assets and therefore that strict exchange rate targeting may not necessarily be the best option. However, policy implications are unclear due to the endogeneity of the pass-through to the policy regime.
Econometrics --- Foreign Exchange --- Inflation --- Macroeconomics --- Price Level --- Deflation --- Monetary Policy --- Open Economy Macroeconomics --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Currency --- Foreign exchange --- Econometrics & economic statistics --- Exchange rates --- Price indexes --- Exchange rate adjustments --- Vector autoregression --- Prices --- Econometric analysis --- Croatia, Republic of
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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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Balance-sheet analysis (BSA) complements traditional flow-oriented macroeconomic analysis by gauging mismatches in aggregate and sectoral balance sheets of an economy. Enabled by recent progress in data availability, this paper applies BSA to Georgia, focusing on currency mismatches. In reviewing developments over the last five years, the paper finds that the still-high level of dollarization continues to create financial vulnerabilities, but that the overall level of currency mismatch has fallen and that liquidity problems are unlikely, in part owing to a strengthening of sectoral buffers, hedges, and insurance against shocks. Policy recommendations include accumulating reserves, strengthening securities markets, enhancing banking supervision, and maintaining a flexible exchange rate.
Dollar, American. --- Electronic books. -- local. --- Fiscal policy -- Georgia. --- Monetary policy -- Georgia. --- Finance --- Business & Economics --- International Finance --- Fiscal policy --- Monetary policy --- Monetary management --- Tax policy --- Taxation --- American dollar --- Government policy --- Economic policy --- Currency boards --- Money supply --- Finance, Public --- Money --- Banks and Banking --- Exports and Imports --- Finance: General --- Money and Monetary Policy --- Methodology for Collecting, Estimating, and Organizing Macroeconomic Data --- Data Access --- Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook: General --- Accounting --- Macroeconomic Analyses of Economic Development --- Economywide Country Studies: Europe --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- General Financial Markets: Government Policy and Regulation --- International Lending and Debt Problems --- Monetary Policy --- Banking --- Monetary economics --- International economics --- Commercial banks --- Currencies --- Currency mismatches --- External debt --- International reserves --- Financial institutions --- Financial sector policy and analysis --- Central banks --- Banks and banking --- Financial risk management --- Debts, External --- Foreign exchange reserves --- Georgia
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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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In this paper, we assess the macroeconomic determinants of stock market capitalization in a panel of 17 countries in the Middle East and Central Asia, including both hydrocarbon-rich countries and economies without sizeable natural resource wealth. In addition to traditional variables, we include an institutional variable and remittances among the regressors. We find that (i) both institutions and remittances have a positive and significant impact on market capitalization; and (ii) both regressors matter, especially in countries without significant hydrocarbon sectors; whereas (iii) in resource-rich countries, stock market capitalization is mainly driven by the oil price.
Exports and Imports --- Finance: General --- Macroeconomics --- General Financial Markets: General (includes Measurement and Data) --- Financial Markets and the Macroeconomy --- Remittances --- Energy: Demand and Supply --- Prices --- Finance --- International economics --- Stock markets --- Market capitalization --- Financial sector development --- Oil prices --- Stock exchanges --- Financial services industry --- International finance --- United States
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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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Similar to other emerging economies, the Egyptian stock market has recently experienced a remarkable run-up but also a major downturn. This paper analyzes the stock market from two angles. First, it compares the performance of the major stock price index with its underlying fundamentals. Second, it explores the relationship between the Egyptian and other stock markets. The paper finds that (i) there is some evidence against a stable relationship between the Egyptian index and its fundamental value; and (ii) short-term correlations and long-term cointegrating relations provide conflicting signals on the value of Egyptian stocks as a means of diversification.
Finance: General --- Financial Risk Management --- Macroeconomics --- General Financial Markets: General (includes Measurement and Data) --- Price Level --- Inflation --- Deflation --- Financial Crises --- Finance --- Economic & financial crises & disasters --- Stock markets --- Asset prices --- Emerging and frontier financial markets --- Price indexes --- Asset bubbles --- Stock exchanges --- Prices --- Financial services industry --- Financial crises --- Egypt, Arab Republic of --- Investments
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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.
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