Distr.
LIMITED
CS/TCM/TOTMMIF/III/5
October 2012
Original: ENGLISH
COMMON MARKET FOR EASTERN
AND SOUTHERN AFRICA
Training of Trainers on Macroeconomic Modelling
Impact And Forecasting (Domestic & External Shocks)
22-26 October, 2012
COMESA Monetary Institute
Nairobi, Kenya
REPORT ON TRAINING OF TRAINERS ON MACROECONOMIC
MODELLING IMPACT AND FORECASTING (DOMESTIC &
EXTERNAL SHOCKS) FOR SENIOR EXPERTS OF
MINISTRIES OF FINANCE AND CENTRAL BANKS
(10 - 2012)IZ-mmn
CS/TCM/TOTMMIF/III/5
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A.
INTRODUCTION
1.
The 17 Meeting of the COMESA Committee of Governors of Central Banks
which was held in Ezulwini, Swaziland on 4th November 2012 decided that COMESA
Monetary Institute (CMI) should organise training of trainers on macroeconomic
modelling. In line with that decision CMI has, therefore organised the Training of
Trainers on Modelling the Impact of Shocks on macroeconomic policies from 22-26
October 2012 in Nairobi, Kenya. The overall objective is to train participants in
constructing macro-models and conducting simulations in order to analyze the
impact of macroeconomic shocks.
2.
The specific objectives of the training were:






Understand the nature of macroeconomic shocks
Recognize why economists worry about unit roots and non-stationarity
Understand the economic theory and logic underlying Cointegrated VAR
and SVAR models;
Realize the statistical needs to undertake cointegration analysis and
SVAR modeling;
Interpret results from an estimated Cointegrated VAR and SVAR models
Comprehend how forecasting is performed using Cointegrated VAR and
SVAR models
3.
The expected outcomes of the training was to enable participants to learn how
to build small SVAR models, to conduct simulations of economic and policy shocks
and to interpret the results, i.e. impact of the shocks on the economy. Further
participants will acquire skills to forecast macro-variables by means of a VAR
models. In doing so, participants will acquire the basic command of econometric
techniques and tools that are essential to policy analysis, using EVIEWS software.
Dr. Noah Mutoti of Bank of Zambia was the facilitators of the training.
B.
ATTENDANCE, OPENING OF THE MEETING, ADOPTION OF THE
AGENDA AND ORGANISATION OF WORK
4.
The meeting was attended by delegates from Central Banks and Ministries of
Burundi, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Rwanda Sudan,
Uganda, Zambia, and Zimbabwe the list of participants is in Annex I of this report.
Opening of the Meeting (Agenda item 1)
5.
In his opening address, Mr. Ibrahim A. Zeidy, Director of the COMESA
Monetary Institute welcomed the delegates on behalf of the Secretary General of
COMESA. He underscored that policy makers in Ministries of Finance and Central
Banks need to understand the impact of domestic and external shocks on
macroeconomic management in order to design appropriate fiscal and monetary
policies that respond to changes in domestic and external shocks. He also said that
better informed policy making, which is based on quantitative analysis, is sin-quanon for creating a more conducive environment for long term development, real
integration and financial integration.
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6.
Professor Kinandu Muragu, Executive Director of the Kenya School of
Monetary Studies also made a statement. In his statement he also said that
macroeconomic modelling is a very important tool for forward looking policy
research.
Agenda and Organisation of Work (Agenda item 2)
7.
The following were the agenda of the training
a)
b)
c)
Opening of the training
Adoption of the agenda and organisation of work
Presentations on the following:
i)
ii)
iii)
iv)
v)
vi)
d)
C.
Over view of Macroeconomic Shocks
Suites of Models to Analyze Impact of Shocks
Practical exercises on Unit Roots tests
Practical exercises in Cointegration Analysis
Practical exercises in Structural VAR (SVAR) Modeling
Pratical exercises in forecasting with VAR
Wrap up session
ACCOUNT OF PROCEEDINGS
Over view of Macroeconomic Shocks (agenda item c(i))
8.
Under this agenda item Dr. Mutoti pointed out that one of the major concerns
of macroeconomists is the identification and measurement of various shocks that
affect the economy. He said that monetary and fiscal policies are used as shock
absorbers to mitigate the impact of shocks. He elaborated on types of shocks which
include domestic and external demand shocks, supply shocks, and nominal versus
real shocks. He also discussed macroeconomic responses to shocks.
Suites of Models to Analyze Impact of Shocks (agenda item c (ii))
9.
Under this topic he discussed the alternative approaches to modelling the
impact of the shocks which are grouped under two categories: Structural Vector
Autoregressive (SVAR) and Dynamic Stochastic General Equilibrium (DSGE)
models. He said that SVAR models are based on the desire to develop a model that
provides insights on the behavioural relationships underlying the functioning of the
economy. He explained that DSGE models provides an explicit interemporal general
equilibrium model of the economy based on the optimizing decisions of households
and firms. Parameters of most DSGE models are calibrated or estimated using
Maximum Likelihood Methods.
10.
He pointed that that these two approaches are closely related as follows:
o
DSGE models can be approximated by restricted VAR models
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o
Both the approaches are employed to carry out impulse response
analysis—i.e., dynamic response of a variable to a shock--- in a
structurally meaningful manner.
Practical exercises on Unit Roots tests (agenda item c (iii))
11.
He explained that many, including Engle and Granger (1987) found that many
macroeconomic time series are non-stationary and thus contain a unit root. He
therefore pointed out that, It is important to test whether series are stationary
because:
o
of the problem of nonsense or spurious regressions
o
a non-stationary time series implies that the effects of shocks never die
out.
12.
He provided hands on training on unit root testing. He also introduced a unit
root test that allows for the presence of a one-time structural break
Practical exercises in Cointegration Analysis (agenda item c (iv))
13.
Under this topic he covered different tests of cointegration. Participants did
practical exercises based on Zambian data on tests for cointegration; a sequential
procedure used to determine the number of cointegrating vectors; establishing the
Cointegration Rank; imposing zeo restrictions of “A” and “B” coefficients, and
identification of cointegration of long run relationships,
Practical exercises in Structural VAR (SVAR) Modeling (agenda item (c (v))
14.
Under this topic participants did practical exercises based on Zambia data on
moving average representation, impulse response functions; imposing
contemporaneous and long term restrictions; tests for over identified models; and
forecast error variance decompositions.
Pratical Exercises in Forecasting with VAR (Agenda item (c (vi)
15.
Under this topic participants did practical exercises on forecasting with VAR.
Wrap-up session (Agenda item (d))
16.
The purpose of this session was to get feedback from participants on the
relevance and usefulness of the training. The participants appreciated the training
and fully agreed that it enabled them to learn how to build small SVAR models, to
conduct simulations of economic and policy shocks and to interpret the results, i.e.
impact of the shocks on the economy. Further participants also agreed that they
acquired skills to forecast macro-variables by means of a VAR models.
17.
The participants, however, made the following observations in respect of
organization of future such trainings by COMESA:
(i)
The participants felt hat the one week allocated for the course was not
enough to grasp all the theoretical and practical issues. They therefore
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(ii)
proposed that a minimum period of two weeks should be allotted for
future trainings. Two weeks was agreed to be adequate to cover both
theory and the practical exercises.
In order to ensure continuity and produce trainers who are of high
standard, central banks should nominate the same individuals who
participated in the current training for the coming few years.
(iii)
In order for the trained to be a trainer, it is necessary to ensure that the
trained achieved certain minimum standards
(iv)
The topic for next year’s training should be “Panel Unit Roots and
Cointegration”. It was agreed that such analysis will help to analyse
economic data not only for one country but at a regional or continental
level. Such analysis is useful when an issue is ambiguous as related to
one country and a researcher wants to know the evidence elsewhere in
the region.
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ANNEX 1
LIST OF PARTICIPANTS/LISTE DES PARTICIPANTS
BURUNDI
Mr. Alexis Nkunzimana, Economist, Analysis, Bank of Burundi, BP 705, Bujumbura, Tel: +257 22224072, Fax:
+257 2223128, E-mail: alexnkunzi2001@yahoo.fr
EGYPT
Ms. Amira Elsebaei, Economic Researcher, Central Bank of Egypt, P.O Box 54 Elgomhoria St. Cairo, Egypt. Email:amira.saleh@cbe.org.eg
ERITREA
Mr. Yohannes Asmelash Tekle, Bank of Eritrea, P. O. Box 848, Eritrea, Tel: +291 8373200, Email:
yohannesa@boe.gov.er or yohanasm@gmail.com
Mr. Habtom Tewolde Ghezai, Bank of Eritrea, P. O. Box 849, Tel: +291 1 123033, Email: habtomt@boe.gov.er
ETHIOPIA
Mr. Alemayehu Demissew Taye, Economist, National Bank of Ethiopia, P. O. Box 24208/1000,Tel: +251
913251083 Addis Ababa, E-mail: alemsight@gmail.com
Mr. Anteneh Geremew, Statician, National Bank of Ethiopia, Tel: +251 9249717,
Email: 12.antedagm@gmail.com
KENYA
Mr. Musyoka Mukulu, Economist, Ministry of Finance, P. O. Box 30007 00100, Nairobi, Tel: +254 0720 592567,
Email: wmukulu@treasuryy.go.ke
Mr. Denis Lewa Muganga, Economist, Ministry of Finance, P. O. Box 30007 00100 Nairobi, Tel: +254 0721
285800, Email: dbmuganga@treasury.go.ke or denismuganga@gmail.com
Mr. Anthony Maithya Muli, Economist, Central Bank of Kenya, P. O. Box 60000 00200 Nairobi, Tel: +254 0722
698467, Email: muliam@centralbank.go.ke
Mr. Obadiah Kungu Mungai, Economist, Ministry of Finance, P. O. Box 21951 00100 Nairobi,
Tel: +254 0721 774129, Email: okungu@treasury.go.ke
Mr. Jacob Otieno Gumba, Senior Economist, Ministry of Finance, P. O. Box 30007 00100 Nairobi, Tel: +254
2252299 Ext.33133, Email :jogumba@treasury.go.ke
Mr. Christopher Amdany, Economist, Central Bank of Kenya, P. O. Box 60000 00200 Nairobi, Tel: +254 0723
572181, Email: chrisanto@gmail.com or amdanyCR@centralbank.go.ke
Ms. Elisheba Kamanda, Economist, Central Bank of Kenya, P. O. Box 60000 00200 Nairobi, Tel: +254
0721859730 or +254 202863205
LIBYA
Mr. Naji Belsagem, Deputy Director, Central Bank of Libya, Tel: +002 18924313370, Email:
nage70@yahoo.com
MADAGASCAR
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Mr. Belalahy Aubin Aurore, Fondede Pouvoirs, Statistician Economist, Central Bank of Madagascar, BB 550
Antananarivo, Tel: +261 202221751 or +261 202221752, E-mail: a.belalahy@bfm.mg ; aabelalahy@yahoo.fr
MALAWI
Dr. Kisu Simwaka, Principal Economist, Reserve Bank of Malawi, ,Tel: +265 888308080,Email:
kisusimwaka@yahoo.co.uk
Dr. Mark Lungu, Principal Economist, Reserve Bank of Malawi, P.O Box 30063, Lilongwe, Malawi, Tel: +265
991557965,Fax: +265 1770593, E-mail: mlungu@rbm.mw
Ms. Madalitso Mandiwa, Principal Economist, Ministry of Finance, P. O. Box 30049, Lilongwe, Malawi, Tel: +265
1789355, Fax: +265 1789173, Email: madamandiwa@yahoo.com
Ms. Suzgo Judith Luhanga, Economist, Ministry of Finance, P. O. Box 30049, Lilongwe, Malawi, Tel: +265 888
922 999, Fax: +265 1 789173, Email: sluhanga@gmail.com
RWANDA
Mr. Wilberforce Nuwagira, Economist, National Bank of Rwanda, P. O. Box 531, Kigali, Tel: +250 788737357,
Email: wnuwagira@bnr.rw
SUDAN
Dr. Magdi Alamin NorainIdom ,Economist, Central Bank of Sudan, P.O Box 313, Sudan, Khartoum, Tel: +249
9123 78141, Fax: +249 185 881341, E-mail: magdinorain@hotmail.com
Mr. Bushra Khair Elhag Khair, Economist, Central Bank of Sudan,Tel: +249 121053396, Email:
bushraelhag@gmail.comor bushra.elhang@cbos.gov.sd
SWAZILAND
Ms. Vangile C. Dlamini, Ministry of Economic Planning & Development, P. O. Box 602, Mbabane, Swaziland,
Tel: +268 7617 6492, Fax No: +268 2404 2157, Mbabane, Swaziland. E-mail: dlaminiva@gov.sz,
vangiledlamini@yahoo.com
Mr. Henry Malangeni Mhlabane, Ministry of Finance, P.O Box 443, Tel: +268 2404 8145, Fax: +268 2404
3187,E-mail: mhlabaneh@gov.sz; mhlabaneh@yahoo.com/
Mr. Simiso Mkhonta, Senior Economist, Central Bank of Swaziland, P. O. Box 546, Mbabane, Tel: +268
24082414, Email: simisom@centralbank.org.sz
Mr. Sifiso G. Khumalo, Economist, Ministry of Finance, P. O. Box 443, Mbabane, Swaziland, Tel: +268
24048145/7, Fax: +268 24043187, Email : khumalosg@gov.sz
UGANDA
Mr. Anguyo Francis Leni, Ag. Assistant Director, Bank of Uganda, P. O. Box 7120, Kampala, Tel: +256
417302870, E-mail: fanguyo@bou.or.ug,
ZIMBABWE
Mr. Mudhunguyo Charthebert, Ministry of Finance, Harare, Zimbabwe, Tel: +263 773305887, Email:
cmudhunguyo@gmail.com
Mr. Felix Mufunda, Ministry of Finance, Harare, Zimbabwe, P. O. Box 7705, Causeway, Harare, Tel: +263
773687597, Email: tfmufunda@gmail.com
Mr. Paul G. V. Mukoki, Reserve Bank of Zimbabwe,, P. O. Box 1283, Tel: +263 4703000, Fax: +263 4 705979,
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Email: pmukoki@rbz.co.zw
Mr. Tarinda Samuel, Reserve Bank of Zimbabwe, P. O. Box 1282, Harare, Tel: +263 4 703000, Fax: +263 4
702873, Email: starinda@rbz.co.zw
COMESA MONETARY INSTITUTE
Mr. Ibrahim A. Zeidy, CMI Director. P. O Box 65041-00618, Nairobi. E-mail: izeidy@comesa.int
Mr. Zorodzo Chuma, Economist, COMESA Monetary Institute, Email: ztchuma@gmail.com
Mrs Monica Cherwon, Secretary, E-mail: monicakogo@yahoo.com
COMESA Secretariat, Lusaka, Zambia Tel: +260 211 229725-32, E-mail: secgen@comesa.int
Ms. Mary Ndoti, Snr. Secretary, E-mail: mndoti@comesa.int
Ms. Catherine Mwaba, Bilingual Secretary, E-mail :cmwaba@comesa.int
INTERPRETERS
Ms. Salome Rwiliriza, Interpreter, Tel: +254 723 939320/+250 784 002975, Email: s_rwiliriza@yahoo.com
Mr. Munyamakombe Jean Raymond, P. O. Box 61544 00200 Nairobi, Tel: +254 701524137, Email:
mjray1202@yahoo.com
Mr. Butarama Martin, P. O. Box 61544 00200 Nairobi, Tel: +254 715961447, Email:
martin.butarama@gmail.com