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Consolidated Research Paperreviewed 31 Jan 2018



The Macroeconomic Management Programme (MMP) conducted an In-country capacity building workshop on “Intermediate macroeconomic modelling and forecasting for officials of the Zimbabwe Ministry of Finance and Economic Development (MoFED).  This was a follow up to a workshop on “Introduction to Macroeconomic Modelling and Forecasting” that was held for the Ministry in October 2017.

The intermediate macroeconomic modelling and forecasting five (5) day workshop focused on different economic techniques; single equation estimation and forecasting; diagnostic tests and estimation of a Vector Auto Regression (VAR) model. The Workshop also introduced participants to panel data modelling and DSGE modelling. The workshop was attended by 24 participants from various departments of the Ministry. The gender representation was 54 percent males and 46 percent females.  Compared to the October 2017 workshop on introduction to macroeconomic modelling and forecasting conducted for the same Institution,  the statistics show that there has been an increase of female participants by eleven (11) percent, while male participation reduced by 1 percent. This increase can be attributed to the recent merger between the Ministry of Macroeconomic and Investment Promotion and MoFED. This merger therefore increased the probability of participation for females. However, it should be noted that generally, in the MEFMI region, participation in activities related to macroeconomic modelling and forecasting is mostly skewed towards males. This may reflect the staff composition of modelling units in the MEFMI client institutions, where males dominate, in general.  

Participants were taken through different economic theories and shown how they related to macroeconomic modelling and forecasting. The identification of macroeconomic variables used in the estimation process was also covered. Hands-on exercises focused on loading data, analysing and conducting descriptive statistics into the Eviews with the guidance of the resource team. 

This session on overview of different economic techniques focused on various economic models. This included the error correction model, and simultaneous equation models. Discrete choice models, panel data models, VAR models and partial adjustment models were also covered.

The resource team took participants through properties of least square estimators, and different statistical inferences. The team also discussed how the sample size can impact the macroeconomic model. Each participant was then required to conduct exercises individually, on single equation estimation. 

Discussions during the session on diagnostic tests focused on estimation diagnostics such as residual, stability and coefficient tests. The residual test covered heteroscedasticity, normality and serial correlations. Coefficient testing focused on linearity test (i.e. adopting the wrong functional form), testing for the omission of relevant variables and testing for inclusion of redundant variables. Stability tests focused on Ramsey RESET and the CUSUM tests.

The concept of VARs, process of estimating global VARs, reduced form VARs, and structural VARs were demonstrated to participants. In addition, the resource team also took participants through granger Causality Tests, Johansen Cointegration Test, Impulse Responses and the variance decomposition. Hands on exercises focused on the estimation of Vector Error Correction Models.

Various ways of reporting forecasts from the estimated model were demonstrated to participants. The participants were also required to do point forecasts, density forecasts and fan charts in Eviews.

The session on panel data estimation introduced participants to panel data models. They were taught benefits and limitations of panel data models, fixed and Random effect Models and the Hausman test for Fixed and Random Effects. Participants also learnt pooled panel data models, between estimator and first difference panel models. Individual hands on exercises on the estimating of panel models were conducted. 

Participants were introduced to theories of the Real Business Cycle and the New Keynesian DSGE Model.  The session introduced participants to interactions between the IS-curve, Phillips curve, Exchange rate determination (Uncovered Interest Parity) and the monetary policy rule. The process of calibration and estimating a DSGE models using the Dynare software was also demonstrated to participants.
Participants were divided into three (3) groups. At the end of each day, each group was given assignments which required them to make presentations to all workshop participants. This was in addition to the individual hands on exercise that were compulsory for each participant. The main idea was to enhance participant’s knowledge in intermediate macroeconomic modelling and forecasting.

The training equipped participants with requisite knowledge and analysis of how macroeconomic modelling tools can be used for macroeconomic management and policy decisions. The sessions on panel data and DSGE models further widened participant’s scope of macroeconomic modelling

Adhoc discussions with the workshop participants presented opportunities to explore additional areas of capacity interventions. One of the main outputs from these discussions is the need to continue training participants on research methods and methodologies. 

The resource team was made up of Dr. Austin Chiumia (MEFMI Accredited Fellow from Bank of Malawi) and Mr. Sayed Timuno (MEFMI staff member and Graduate fellow)