National Bank of Angola officials trained on forecasting and policy analysis system

In November 2019, MEFMI extended training to staff at the National Bank of Angola (BNA) on the core forecasting model with a money block.  The training is part of the transition that BNA has embarked on for its money targeting regime which requires the addition of a monetary block to its current forecasting system. To give the regime transition adequate analytical support, BNA staff received online technical assistance from MEFMI during the week of 24 to 31 August, 2020. The objective of the training was to help BNA staff to understand the new monetary block and in turn strengthen the forecasting process as well as improve their analytical and economic modelling skills.

The mission delivered lectures on the foundations of the new money block in new-Keynesian models. The mission also involved acquainting staff with how the model works and how to interpret policy recommendations emerging from the model simulations by working through the model and its core parts. Participants were also taken through the recent changes to money market operations and how to derive the reserve money targets in future.

Data handling, preparing the database of observables and analysing the money targets were also demonstrated.  Participants also learnt how to use the method of Kalman filtration and estimate fundamental (equilibrium) values for real variables, the current position of the economy in the business cycle, and economic shocks. They were also acquainted with different ways of imposing judgments on unobserved components, including hands-on experience on how to review the calibration of economic shocks and behavioural parameters to better capture recent economic dynamics in line with the new policy framework.

The mission increased participant’s awareness and knowledge of the forecasting and policy analysis system (FPAS) in the context of a money targeting framework. They are now able to produce forward-looking projections of the monetary policy relevant variables, the interest rate and inflation, consistent with the reserve money targets. They are also able to produce forward-looking projections of money targets, which are consistent with the inflation objective (implicit or explicit), long-term growth of the non-oil economy and changes in money velocity and at the same time provide forward-looking projections of money market rates.

A step by step FPAS forecasting manual which outlines the process of generating consistent model output was developed and it will be translated into Portuguese in order to reinforce skills development in a language participants are more comfortable with.

Four (4) officials from the forecasting team of the BNA participated in the mission and were guided by a resource team made up of Dr. Jiri Lukac (Senior Economist, OGResearch) and Dr. Sayed Timuno (MEFMI Programme Manager).

Prepared by Sayed Timuno