Quarterly Projection Model for the National Bank of Rwanda

Jan Vlcek and Mikhail Pranovich

No 2020/295, IMF Working Papers from International Monetary Fund

Abstract: National Bank of Rwanda (BNR) modernized monetary policy and transited to the price-based policy framework in January 2019. The Forecasting and Policy Analysis System (FPAS) is the cornerstone for the new forward-looking framework, which mobilizes and organizes resources and sets processes for regular forecasting rounds. The core of this system is a structural macroeconomic model for macroeconomic analysis and projections to support the BNR staff’s policy recommendations to the monetary policy committee. This paper documents the quarterly projection model (QPM) at the core of the FPAS at the BNR. The model is an extension of the canonical structure in Berg et al (2006) to reflect specifics of the interest-rate-based policy framework with a managed exchange rate, the effect of agricultural sector and harvests on prices, and the role of fiscal policies and aid flows.

Keywords: Rwanda; Forecasting and Policy Analysis; Quarterly Projection Model; Monetary Policy; Managed Exchange Rate; Fiscal Impulse; Aid; WP; food price inflation; central bank; floating exchange rate; money market; nominal exchange rate depreciation; headline inflation; depreciation target; depreciation rate; demand shock; transmission mechanism; energy price inflation; inflation deviation; food inflation; real world oil price gap; price gap; Inflation; Food prices; Agricultural production; Exchange rates; Central bank policy rate; Global (search for similar items in EconPapers)
Pages: 46
Date: 2020-12-21
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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