Download MODELLING & FORECASTING SYSTEM IN EAC CENTRAL BANKS

UNITED NATIONS
ECONOMIC COMMISSION FOR AFRICA
Sub regional Office for Eastern Africa (SRO – EA)
MODELLING & FORECASTING SYSTEM IN EAC
CENTRAL BANKS: EMPIRICAL ANALYSIS
Dr. Félicien USENGUMUKIZA
Senior Lecturer at National University of Rwanda
Kigali, March 13TH 2010
PRESENTATION OUTLINE
 Overview of Macroeconomic models and Forecasting
 Objective of the study
 Methodology
 Justification of Modelling and Forecasting Methods in EAC Central
Banks
 Challenges and Gaps related to Modelling and Forecasting use in
EAC Central Banks
 Conclusion
 Recommendations
OVERVIEW OF MACROECONOMIC MODELS
AND FORECASTING
MACROECONOMIC MODEL
Macroeconomic model is a basic tool of analysis used to describe, to
explain and to understand macroeconomic phenomenon.
MACROECONOMIC MODEL (CONT’D)
A model serves as like a
laboratory of
experimentation or for
testing hypothesis
Specifying equations
expressing the
relationship between the
selected macroeconomic
variables
Expressing economic
identities if required
Making assumptions
regarding behaviour of
macro variables,
WHY
MACROECONOMIC
MODEL MATTER?
Specifying and defining
variables used in the
model,
Specifying criteria for
drawing conclusions
ECONOMIC FORECASTING
Economic forecasts predict the course of the aggregate economy and
concentrate on variables such as GDP analysis, interest rates, the rate of
inflation, and the rate of unemployment. Forecasts of private consumption
and investment, government expenditures, and net exports help government
policymakers responsible for fiscal policy.
FORECASTING
METHODS
QUANTITATIVE
METHODS
use historical
data as the basis
of estimating
future outcomes
TIME SERIES
METHODS
use the assumption
that it is possible to
identify the
underlying factors
that might influence
the variable that is
being forecast
CAUSAL
FORECASTING
METHODS
QUALITATIVE
METHODS
incorporate intuitive
judgements, opinions
and subjective
probability estimates
JUDGEMENTAL
METHODS
MODELLING & FORECASTING METHODS
IN EAC CENTRAL BANKS
OBJECTIVE OF THE STUDY
 To undertake a stocktaking of the competency gaps in Economic Modelling
and Forecasting in the five central banks;
 To define the areas where the overall level of the region stands behind;
 To define needs of a training capacity building program and the recipient
candidates;
 To formulate recommendations on training modules and general content.
METHODOLOGY
The field work has been identified as the best approach. It is in this context
that the tour in the five EAC central banks was carried out within two
weeks. It has been identified that Research Department in each central
bank would be the best source of information related to the needs in terms
of training in Modelling and Forecasting Program.
JUSTIFICATION OF MODELLING AND FORECASTING
PROGRAM IN EAC CENTRAL BANKS
 To develop adequate skilled capacity in analytical capability of EAC Central Banks to
effectively manage the monetary policies and monitor the performance of the Economies
in the Region,
 To enhance the capacity in management of reserves money and liquidity forecasting,
 To understand how financial markets work and impact on monetary policy;
 To undertake surveys on inflation expectations;
 To understand interaction between monetary policy and real sector, and liquidity
forecasting ,
 To eliminate liquidity phobia associated with commercial banks borrowing from central
bank.
STUDY ON MODELLING AND FORECASTING IS A TASK
OF RESEARCH DEPARTMENT IN EAC CENTRAL BANKS
National Bank
of Rwanda
(BNR)
Senior Directorate
(Monetary Policy
and Research,
Financial Stability)
Bank of
Uganda
Bank of
Tanzania
Modelling &
Forecasting
Division
Large Macro
econometric Modelling
Section Research
Department
Directorate of
Research
Central Bank
of Kenya
(CBK)
Research
Department
Banque de la
République du
Burundi (BRB)
Directorate of
Research
Monetary &
Financial Market
Department
MODELLING AND FORECASTING SYSTEM IS FACING A
HUGE CHALLENGE IN ALL EAC CENTRAL BANKS
 Some Central banks are not using the econometric approach in modelling and
forecasting analysis
 All EAC central Banks witness a gap in terms of high qualified staff equipped with
econometric background
 Use of adequate software related to modelling and forecasting is almost inexistent
 Lack of harmonisation in terms of forecasting techniques. This leads to the
diversification in terms of interpreting the results from respective central banks
GAPS RELATED TO USE OF MODELLING &
FORECASTING SYSTEM IN EAC CENTRAL BANKS
• Scarcity of sound forecasting frameworks weakens budgeting and planning processes
in the continent;
•
EAC Central Banks remain far behind in building full-fledged macroeconomic models
and in providing accelerated training for qualified modellers and forecasters ;
•
Macroeconomic forecasting in EAC Central Banks has been highly dependent on
models developed in others central banks in the world, which were not true
representation of local realities;
CONCLUSION
 Modelling and Forecasting Program is designed to provide anyone who needs to make
financial decisions,
 The reality found in EAC central Banks confirms that the training in Modelling and
Forecasting is for great necessity,
 The heads of research department in respective EAC Central banks are welcoming the
initiative proposed by UNECA of providing such kind of training,
 As the EAC is deepening and widening its regional integration, the harmonisation of
macroeconomic and financial analysis will facilitate to eliminate gaps observed in
interpretation of national and regional economy.
RECOMMENDATIONS
 EAC central Banks needs training in modelling and forecasting in order to facilitate the
harmonisation of macro economic and financial analysis with the community.
 due to existing gaps between different central banks, it would be necessary to organise
internal training related to specific needs and gaps of each individual central bank.
 The share of experience among staff of central banks would accelerate the harmonisation
of financial analysis
 Due to the project establishing the EAC central bank, some activities would be executed
jointly with the five central banks.
 The EAC needs to establish its own model related to its reality rather than continuing
using models applied in advanced economies.
LIST OF CONTACTED PERSONS
N˚
Country
Institution
1.
Rwanda
National Bank of
Rwanda (BNR)
2.
3.
4.
5.
Burundi
Uganda
Tanzania
Kenya
Banque de la
République du
Burundi (BRB)
Name of contacted
Person
Position
Dr. Kigabo Rusuhuzwa
Thomas
Chief Economist
Mr. Sota Bonaventure
Directeur
Responsable
service des Etudes
Mr. Audace Niyonzima
Deputy Director Monetary &
Financial Market Department
Mr. Joseph Bahizi
Head of Monetary & Financial
Market Department
Dr. Adam Mugume
Assistant
Modelling
Division
Phone number
E-mail
P.O Box 531
Kigali -Rwanda
+250 788303633
[email protected]
+257 79910367
[email protected]
+257 79970126
[email protected]
+257 77733230
[email protected]
+256 772416058
[email protected]
+256 774224565
[email protected]
du
P.O Box 705
Bujumbura Burundi
Director
Head,
&
Forecasting
Bank of Uganda
Bank of Tanzania
Address
Mr. Francis Leni Anguyo
Head, Large Macroeconometric
Modelling Section Research
Department
Dr. Kamili Alphonce
Kombe
Deputy Director, Research
Mr. Charles G. Koori
Director of Research Department
Mr. Lukas Njoroge
Research Department
Central Bank of
Kenya (CBK)
P.O Box 7120
Kampala Uganda
P.O Box 2939
Dar es Salaam
Tanzania
P.O Box 6000000200 Nairobi Kenya
[email protected]
+254 722235583
[email protected]
+254 720459004
[email protected]
THANK YOU FOR YOUR ATTENTION!