MEFMI / IMF Collaborate on Nowcasting Workshop

Central Banks and Ministries of Finance require timely and up-to-date data for effective macroeconomic policy decision-making processes. However, some critical data needed to enable this function is released with a time lag, leading to delayed policy analysis. This has been worsened by the COVID-19 pandemic, which has disrupted the traditional data collection processes and further strained efforts towards coordinated policy responses. These developments among others, provide substantial challenges to evaluate economic activity in real time for countries in the MEFMI region. As such, there is need to close this gap by helping policymakers to exploit information available in the interim to monitor economic conditions in real time until official figures become available.

It is against this background that MEFMI, in collaboration with the IMF-ICD offered a virtual regional workshop on Nowcasting. The workshop, which was held from 23 May to 3 June 2022, aimed at imparting participants with an understanding of the concepts, methods, and modern approaches of developing and incorporating high frequency economic indicators for timely assessments of economic activity.

The course was delivered in two (2) parts.  The first part focused on introducing participants to nowcasting techniques in general as this is a new area of macroeconomic analysis for most countries in the MEFMI region.  It also touched on useful statistical procedures for nowcasting (such as interpolation and seasonal adjustment), as well as more intermediate topics like standard nowcasting methods and factor models, including principal component analysis, BRIDGE, MIDAS, and U-MIDAS.

The second part of the course focused on more advanced topics such as dynamic factor models, state space representation, Kalman filtration and estimation of state space models. The course also featured a case study of the New York Federal Reserve Bank (NYFRB) Nowcasting Report to demonstrate how the techniques learned in the course are utilised at some of the world’s top institutions. It is expected that the knowledge and skills gained from this course will help support real time policy analysis in the MEFMI region.

A total of 45 officials from 11 MEFMI member countries attended the workshop. Of the 45 participants, 16 (36%) were female while 29 (64%) were male. The workshop targeted officials responsible for monetary and fiscal policy decision-making, and staff conducting short/near term macroeconomic analysis and forecasting. The workshop was facilitated by a team of resource persons from the IMF, namely Mr. Diego Rodriguez-Guzman, Mr. Sam Ouliaris, and Ms. Jing Xie.

Prepared by Frank Chansa