Download MODELLING  IN THE NATIONAL BANK OF TAJIKISTAN Khurshed Ismatulloev Dec 09, 2015 Bangkok

MODELLING IN THE
NATIONAL BANK OF TAJIKISTAN
Khurshed Ismatulloev
Dec 09, 2015 Bangkok
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REPUBLIC OF TAJIKISTAN
•Population: 8,3 million (UN, 2014)
•Capital: Dushanbe
•Area: 143,100 sq km (55,251 sq.
miles)
•Languages: Tajik-State language,
Russian-language of the interethnic
communication
•Major religion: Islam
•Life expectancy: 66 years (men), 75
years (women) (UN)
•Monetary unit: 1 Tajik somoni = 100
dirams
•Main exports: Aluminium, electricity,
cotton, fruit, textiles, gold
•GDP per capita: US $1036.0 Internet
domain: .tj
•International dialling code: +992
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Development of modelling and forecasting in the National bank of Tajikistan
Phase I
2013
• Econometric training
Phase II
2013
• Broadening understanding of Monetary Economics
Phase III
2014
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• Medium‐term forecasting using Mantis Scenario Builder
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Development of mod…
All for short term inflation forecast:
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•ARIMA model
2.
•VAR model 3.
•VEC model
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Mantis as a first step to get acquainted with structural models
• Mantis prepares “baseline” forecast on a quarterly basis and offers an online Scenario Builder tool to create alternative scenarios
• Pros
– Baseline forecast:
• comprehensive review of economic developments over the quarter
• most likely scenario forecast based on the developments
• overview of risks to the baseline
– Scenario Builder:
• possibility of adjusting the baseline scenario online
• save, report, and compare scenarios online
• download databases with different scenarios
• Cons
– Scenario Builder:
• limited number of pre‐defined scenarios and shocks
• limitations on NTF assumptions (i.e. NTFs can only be changed within a certain range)
• no possibility of changing the model structure or model calibration
• limited flexibility in changing a specific single shock assumptions
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Current subproject
Phase I
2015
• Developing internal FPAS capacity (agreed)
Phase II
2016
• Strengthening internal and developing external FPAS capacity (possible)
Phase III
2016
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• Strengthening external FPAS capacity (possible)
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QPM model
 A canonical gap model ‐simple model sufficient to describe basic workings of monetary transmissions




Aggregate demand –IS Curve
Aggregate supply –Phillips Curve
Uncovered interest rate parity (simple/extended)
Policy rule –Taylor Rule
 Work horse at many central banks
 Developed countries: Bank of Canada, Reserve Bank of New Zealand, Switzerland
 Emerging economies: Czech Republic, Serbia, Ukraine, Georgia, Romania, Colombia, Peru, Guatemala, Botswana
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Why we chose QPM model?
DSGE
Quality of model (forecast)
QPM
VEC
VAR
ARIMA
Quantity of transition variables
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Our model…
 Distinguishes between the observed value and a trend (≈ steady‐state value of the system)
 It’s very easy to understand and explain to people
 Forward‐looking
 Model consistent expectations of …
• Inflation • Exchange rate
 Policy analysis
 Central bank is part of the model
 Open structure
 Expert views may be easily incorporated
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Ideal transmission mechanism
Inflation expectations
LR interest rates
SR interest
rate
RMCI
Output gap
Inflation
Ex rate
Shocks
hitting the
economy
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Financial shocks:
Foreign rates
Portfolio changes
Demand shocks:
Foreign demand
Fiscal policy
Inflation shocks:
Indirect taxes
Energy prices
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Building TJ model
• Distinguishing features:
– Monetary policy operates through FX
– Remittances
• real remittances gap in IS curve
• real remittances gap in MP rule
• real remittances trend growth in REER trend depreciation
• effective foreign output gap affects real remittances gap
– Nominal IRs are residual in the UIP condition
– External sector approximated by RU (representing all CIS region) and US (representing rest of the world)
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Model extensions
• Decomposition of aggregate demand
– C, I, G, X, M
• Decomposition of aggregate supply
– Food, non‐food, and services Phillips curves
– Relative prices
• Money demand
• Fiscal side
– structural/cyclical deficit decomposition
• Using different model calibrations for history and forecast
• Bayesian estimation of some model parameters
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Forecast
Expectations:
Inflation level in 2015 ‐
2016 will maintain in scope of projection (6.0 percent);
Exchange rate pressures’ risk and its influence to inflation will remain.
Deceleration of Russian economic growth;
Decreasing of remittances and aggregate demand.
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SWOT analysis
Strengths
Weaknesses
‐ Capacity constraints (lack of qualified staffs)
‐ Reform‐oriented, young, and ambitious management
‐ Backward‐looking monetary policy
‐ Recognition of the need for changes
‐ Weak communication (internal and external)
‐ Now we have good model
‐…
‐ Poorly working transmission mechanism
Internal factors
‐ Low credibility, low transparency
‐ Underdeveloped financial sector
‐…
Opportunities
Threats
‐ Increase of NBT’s independence
‐ Loosing momentum
‐ TAs in different areas
‐ Getting sunk in bureaucracy ‐ NBT is not the first one to incorporate FPAS –
build on the shoulders of others
‐ Continuation of old practices
‐ Starting from a low base (every step in right direction will have a big positive impact)
External factors
‐ Weak economy (non‐diversified exports, strong dependence on remittances, low production base)
‐…
‐…
Positive
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Negative
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You are welcome…
THANKS for your attention!!!
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