Presentation on theme: "UNITED NATIONS ECONOMIC COMMISSION FOR AFRICA"— Presentation transcript:
1 UNITED NATIONSECONOMIC COMMISSION FOR AFRICASub regional Office for Eastern Africa (SRO – EA)MODELLING & FORECASTING SYSTEM IN EAC CENTRAL BANKS: Empirical analysisDr. Félicien USENGUMUKIZASenior Lecturer at National University of RwandaKigali, March 13TH 2010
2 Presentation Outline Overview of Macroeconomic models and Forecasting Objective of the studyMethodologyJustification of Modelling and Forecasting Methods in EAC Central BanksChallenges and Gaps related to Modelling and Forecasting use in EAC Central BanksConclusionRecommendations
3 OVERVIEW OF MACROECONOMIC MODELS AND FORECASTING
4 Macroeconomic modelMacroeconomic model is a basic tool of analysis used to describe, to explain and to understand macroeconomic phenomenon.
5 Macroeconomic model (Cont’d) Why macroeconomic model matter? A model serves as like a laboratory of experimentation or for testing hypothesisMaking assumptions regarding behaviour of macro variables,Why macroeconomic model matter?Specifying equations expressing the relationship between the selected macroeconomic variablesSpecifying and defining variables used in the model,Expressing economic identities if requiredSpecifying criteria for drawing conclusions
6 Economic ForecastingEconomic 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.
7 use historical data as the basis of estimating future outcomes FORECASTINGMETHODSQUALITATIVEMETHODSQUANTITATIVEMETHODSuse the assumption that it is possible to identify the underlying factors that might influence the variable that is being forecastuse historical data as the basis of estimating future outcomesincorporate intuitive judgements, opinions and subjective probability estimatesJUDGEMENTALMETHODSTIME SERIESMETHODSCAUSALFORECASTINGMETHODS
8 MODELLING & FORECASTING METHODS IN EAC CENTRAL BANKS
9 Objective of the StudyTo 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.
10 MethodologyThe 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.
11 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.
12 STUDY ON MODELLING AND FORECASTING IS A TASK OF RESEARCH DEPARTMENT IN EAC CENTRAL BANKS National Bank of Rwanda (BNR)Bank of UgandaBank of TanzaniaCentral Bank of Kenya (CBK)Banque de la République du Burundi (BRB)Senior Directorate (Monetary Policy and Research, Financial Stability)Modelling & Forecasting DivisionDirectorate of ResearchResearch DepartmentDirectorate of ResearchLarge Macro econometric Modelling Section Research DepartmentMonetary & Financial Market Department
13 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 analysisAll EAC central Banks witness a gap in terms of high qualified staff equipped with econometric backgroundUse of adequate software related to modelling and forecasting is almost inexistentLack of harmonisation in terms of forecasting techniques. This leads to the diversification in terms of interpreting the results from respective central banks
14 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;
15 ConclusionModelling 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.
16 RecommendationsEAC 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 analysisDue 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.
17 Name of contacted Person List of contacted PersonsN˚CountryInstitutionName of contacted PersonPositionAddressPhone number1.RwandaNational Bank of Rwanda (BNR)Dr. Kigabo Rusuhuzwa ThomasChief EconomistP.O Box 531 Kigali -Rwanda2.BurundiBanque de la République du Burundi (BRB)Mr. Sota BonaventureDirecteur Responsable du service des EtudesP.O Box 705 Bujumbura - BurundiMr. Audace NiyonzimaDeputy Director Monetary & Financial Market DepartmentMr. Joseph BahiziHead of Monetary & Financial Market Department3.UgandaBank of UgandaDr. Adam MugumeAssistant Director Head, Modelling & Forecasting DivisionP.O Box 7120 Kampala - UgandaMr. Francis Leni AnguyoHead, Large Macroeconometric Modelling Section Research Department4.TanzaniaBank of TanzaniaDr. Kamili Alphonce KombeDeputy Director, ResearchP.O Box 2939 Dar es Salaam Tanzania5.KenyaCentral Bank of Kenya (CBK)Mr. Charles G. KooriDirector of Research DepartmentP.O Box Nairobi - KenyaMr. Lukas NjorogeResearch Department