The early years of inflation targeting: Review and outlook

This paper deals with a 'new' type of monetary policy making: Inflation Targeting (IT). It attempts to identify reasons for which countries might be inclined to adopt this framework for monetary policy. By reviewing recent experience of inflation targeting countries, the paper outlines the major operational arguments regarding the implementation of IT. Another important issue is the applicability of IT in transition countries: in the light of EU (and, in the longer run, EMU) accession, Inflation Targeting might be an interesting policy framework to at least some countries in Central and Eastern Europe. --inflation targeting,monetary policy,Central and Eastern Europe

The Early Years of Inflation Targeting -- Review and Outlook

This paper deals with a “new” type of monetary policy making: Inflation Targeting (IT). It attempts to identify reasons for which countries might be inclined to adopt this framework for monetary policy. By reviewing recent experience of inflation targeting countries, the paper outlines the major operational arguments regarding the implementation of IT. Another important issue is the applicability of IT in transition countries: in the light of EU (and, in the longer run, EMU) accession, Inflation Targeting might be an interesting policy framework to at least some countries in Central and Eastern Europe

Three essays in empirical international macroeconomics

Defence date: 4 March 2005Examining board: Prof. Mike Artis, EUI ; Prof. Anindya Banerjee, EUI, supervisor ; Prof. Helge Berger, Freie Universität Berlin ; Prof. Paul Mizen, University of NottinghamFirst made available online 25 August 201

Measuring a Roller Coaster: Evidence on the Finnish Output Gap

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 article 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.

Ghostbusting: which output gap really matters?

Output gap, Potential output, Inflation forecasting, E31, E32, E37,

Ghostbusting

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.Production;Economic forecasting;inflation, forecasting, statistics, statistic, inflationary pressures, monetary policy, prediction, correlations, time series, equation, wage inflation, inflation forecasts, monetary economics, actual inflation, mean square, inflation rate, econometrics, inflation targeting, correlation, aggregate demand, functional form, standard deviation, sample bias, financial statistics, sample size, predictability, autocorrelation, forecasting inflation, price level, high inflation, probability, average inflation, outlier, probability model, number of regressors, arithmetic, standard errors, descriptive statistic, survey, estimation period, outliers, statistical test, sampling, statistical significance, predictions, descriptive statistics, computation, terms of trade, sample mean, absolute error, statistical methods, significance levels, monetary ? policy, statistical measures, orthogonality, minimization

Measuring a Roller Coaster

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.Production;Economic forecasting;unemployment, unemployment rate, forecasting, statistics, rate of unemployment, natural rate of unemployment, time series, cointegration, statistical measures, equation, arithmetic, sample bias, linear trend, correlation, nairu, autocorrelation, correlations, descriptive statistics, employment, mean square, financial statistics, standard deviations, statistical methods, statistic, econometrics, prediction, parameter value, functional form, high unemployment, full-employment, time ? series, number of regressors, rising unemployment, official unemployment rate, sensitivity analysis, estimation period, sample sizes, total labor force, vector autoregression, full employment, estimation procedure, computation, time series analysis, standard deviation, polynomial, finite sample, cyclical unemployment, orthogonality, estimation technique, empirical methods

Trade Openness and Growth: Pursuing Empirical Glasnost

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. This paper applies a transparent econometric method drawn from the treatment evaluation literature (matching estimators) to make the comparison between treated (that is, open) and control (that is, closed) countries explicit while remaining within a statistical framework. Matching estimators highlight that common cross-country evidence is based on rather far-fetched country comparisons, which stem from the lack of common support of treated and control countries in the covariate space. The paper therefore advocates paying more attention to appropriate sample restriction in cross-country macro research. IMF Staff Papers (2009) 56, 447–475. doi:10.1057/imfsp.2008.39; published online 3 March 2009

What drives stock market development in emerging markets--institutions, remittances, or natural resources?

In this paper, we assess the macroeconomic determinants of stock market capitalization in a panel of 17 emerging markets 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.Stock market capitalization Emerging markets Panel Institutions Remittances

What Drives Stock Market Development in the Middle East and Central Asia

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.Stock markets;Middle East and Central Asia;Natural resources;Oil prices;Workers remittances;Economic models;stock market, stock market capitalization, stock market development, domestic credit, financial markets, financial sector, capital markets, capital formation, financial sector development, international financial statistics, financial intermediaries, financial intermediation, investor confidence, stock market liquidity, financial structure, bond, financial intermediary development, financial market development, stock value, financial market, financial sector performance, equity market, commodity prices, capital flows, capital control, stock market developments, financial systems, equity markets