Rwanda Core Model of Inflation to Become More Responsive to the Current Economic Realities in Rwanda

A core model of inflation for Rwanda that was developed by MEFMI in 2012-2013 will undergo both review and validation process during an in-country mission organized by MEFMI from 25 to 29 May 2015 at the National Bank of Rwanda (NBR) in Kigali, Rwanda.

In October 2012, in response to a request by the NBR, MEFMI and the Modeling team of the NBR commenced development of a core model of inflation for Rwanda. The model was completed in December 2013.

MEFMI designed a four-phase modeling project which was carried out by Messrs. Shaun de Jager, Senior Advisor, Research Department, South African Reserve Bank (SARB) and Jean-Baptiste Havugimana, Macroeconomic Management Programme Officer, MEFMI. In the first phase, the team of experts carried out a fact finding mission to establish the exact requirements of the NBR, identified possible data sources, conducted training workshops to load and manipulate data into a workable format that could be used in E-Views. In the second phase, the core model of inflation for the Rwandan economy was constructed by the experts and the NBR modeling team. The third phase had an E-Views programming training component.

Thus, for the skills transfer to be complete and to lay a strong foundation for a successful completion of the model, an E-views programming course was needed for the NBR team. The current, and fourth phase, which runs from 25 to 29 May 2015, will carry out hands-on practice sessions and revise the current core model of inflation to ensure it becomes more responsive to the current economic realities (increased foreign direct investment, reductions in international aid and other new developments in the fiscal sector, issuance of Eurobond to access international capital markets, financial innovation and changing monetary transmission mechanism…) in Rwanda. After this, the model will be validated and officially handed over to the NBR authorities.