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We use a transparent statistical methodology for data-driven case studies—the synthetic control method—to investigate the impact of economic liberalization on real GDP per capita in a worldwide sample of countries. Economic liberalization is measured by a widely used indicator that captures the scope of the market in the economy. The methodology compares the postliberalization GDP trajectory of treated economies with the trajectory of a combination of similar but untreated economies. We find that liberalizing the economy had a positive effect in most regions, but more recent liberalizations, in the 1990s and mainly in Africa, had no significant impact.

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.

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.

Reflecting domestic demand pressures, the output gap has important implications for economic analysis. This paper assesses the usefulness of four commonly-used gap measures for a small set of European countries. The main results are that the policy implications can be very different depending on the gap measure and that, consequently, care should be exercised when employing any such measure. Moreover the paper investigates in a simple inflation forecasting framework the common assertion that the output gap could improve the forecasting accuracy. For annual observations, however, these measures rarely provide useful information and there is no single best measure across countries.

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. Reprinted by permission of Finnish Society for Economic Research

Studies of the impact of trade openness on growth are based either on crosscountry 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 crosscountry macro research.

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

Intro -- Contents -- I. INTRODUCTION -- II. BACKGROUND -- III. ANALYTICAL FRAMEWORK, KEY CONCEPTS, AND DATA -- IV. FOREIGN CURRENCY MISMATCHES IN GEORGIA -- V. ADDRESSING BALANCE-SHEET VULNERABILITIES IN GEORGIA -- VI. CONCLUSIONS AND POLICY IMPLICATIONS -- REFERENCES.

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

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.