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Wojciech Maliszewski

coefficient of the output gap is higher than the literature-consistent prior. This result is key to the estimation of the output gap series, as it indicates that there is a significant amount of information about output gap dynamics to be extracted from the behavior of inflation. The coefficient of the real exchange rate is close to the prior. The coefficient of relative changes in food prices is high and precisely estimated, suggesting that the immediate impact of a supply shock on our measure of core inflation is strong. The estimated short-term influence of second round

International Monetary Fund. European Dept.
This paper aims to determine how much of the economic slowdown of Albania is owing to cyclical conditions and how much to a reduction in potential growth. The analysis shows that average growth in 2009–14 dropped by 3.2 percentage points relative to 1997–2008, of which 2.8 percentage points are due to lower potential growth. Albania has significant potential to improve its export competitiveness. However, Albania’s competitiveness has shown narrow improvements over the past five years, with weak productivity growth and continued concentration in low-skilled labor-intensive sectors with limited value added. This paper also explores the factors underpinning Albania’s relatively low level of general government revenues.
International Monetary Fund

the United States, we include a parallel model of the U.S. economy to provide for sensible dynamics in experiments involving world (US) shocks . The output gap dynamics are represented in a simplified version of equation (1). The structure is the same, but without the exchange rate and world gap terms. y u s g a p t ≡ β u s l d y u s g a p t + 1 + β u s l a g y u s g a p t − 1 − β R R g a p ( R R

Francesco Furlanetto, Paolo Gelain, and Marzie Taheri Sanjani
The recent global financial crisis illustrates that financial frictions are a significant source of volatility in the economy. This paper investigates monetary policy stabilization in an environment where financial frictions are a relevant source of macroeconomic fluctuation. We derive a measure of output gap that accounts for frictions in financial market. Furthermore we illustrate that, in the presence of financial frictions, a benevolent central bank faces a substantial trade-off between nominal and real stabilization; optimal monetary policy significantly reduces fluctuations in price and wage inflations but fails to alleviate the output gap volatility. This suggests a role for macroprudential policies.
Mr. Jiaqian Chen and Lucyna Gornicka

services inflation and wage growth, but inconsistent with accelerating GDP deflator. Over the period of 2014: Q3–2015: Q3, the three indicators of price pressures change in different directions, making it difficult to infer about output gap dynamics. However, all three inflation indicators suggest an improving output gap between 2016: Q2 and 2018: Q2, which is consistent only with the open economy SVAR. Table 2. Changes in Output Gaps and Inflation (In percentage points) Changes in (ppt) 2011Q2–2013Q3 2014Q3–2015Q3 2016Q2–2018Q3 GDP

Alex Pienkowski
This paper outlines a simple three-country macroeconomic model designed to focus on the transmission of external shocks to Portugal. Building on the framework developed by Berg et al (2006), this model differentiates between shocks originating from both inside and outside the euro area, as well as domestic shocks, each of which have different implications for Portugal. This framework is also used to consider the dynamics of the Portuguese economy over recent decades. The model, which is designed to guide forecasts and undertake simulations, can easily be modified for use in other small euro area countries.
Thitipat Chansriniyom, Mr. Natan P. Epstein, and Valeriu Nalban
The paper extends a standard semi-structural model to account for nonlinear and asymmetric effects of monetary policy credibility. In our setting, central bank credibility is proportional to the deviation of inflation expectations from the announced inflation target, with positive deviations being more costly compared to negative ones. A loss in policy credibility as a result of shocks leads to a more persistent, backward-looking inflation process, and is associated with lower output. We find that the extended model with credibility effects matches well the key macroeconomic data over specific past episodes for Indonesia and Philippines and consider its adaptation to integrated policy frameworks as an area for further exploration.
Allan Dizioli and Jochen M. Schmittmann
The paper develops a small New-Keynesian FPAS model for Vietnam. The model closely matches actual data from 2000-2014. We derive an optimal monetary policy rule that minimizes variability of output, inflation, and the exchange rate. Compared to the baseline model, the optimal rule places a larger weight on output stabilization as the intermediate target to achieve inflation stability, while allowing greater exchange rate flexibility. We analyze the dynamics of key macro variables under various shocks including external and domestic demand shocks and a lift-off of U.S. interest rates. We find that the optimal monetary policy rule delivers greater macroeconomic stability for Vietnam under the shock scenarios.