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International Monetary Fund. Monetary and Capital Markets Department
The National Bank of the Republic of Belarus (NBRB) visited Minsk during for the seventh of the planned eight short-term technical assistance (TA) missions to help the NBRB enhance its modeling, forecasting and policy analysis capacity, and the forecasting and policy analysis system, sponsored by the Swedish International Development Agency. The NBRB is reforming its monetary policy framework in line with recommendations of past IMF TA missions and its Road Map for Transitioning to Inflation Targeting with the aim of eventually adopting inflation targeting (IT). Transitioning to IT would require, among other strengthening the monetary policy forecasting and analysis system (FPAS) and better integrating the core quarterly projection model (QPM) into the decision-making process. The mission was mainly aimed at helping with reviewing the initial conditions and compiling a QPM-based forecast as a part of the NBRB’s September forecasting round. The mission, in addition, worked on strengthening processes within the FPAS.
International Monetary Fund. Monetary and Capital Markets Department
This Technical Assistance (TA) report on the Republic of Belarus focuses on various aspects of monetary policy modeling. This TA mission was the fifth from series of quarterly IMF TA missions focused on the forecasting and analysis system capacity building. It was mainly aimed to simulate initial conditions and compile a quarterly projection model (QPM)-based forecast scenario as a part of a practical forecasting round at the National Bank of the Republic of Belarus (NBRB) in March. Moreover, the mission worked with the modeling team to deepen its understanding of the QPM’s role in policy decision making and in internal communication. Adopting Inflation Targeting and increasing monetary policy effectiveness would require broad-based reforms as compressively outlined in the developed Road Map for Transitioning to Inflation Targeting. This medium-term TA project aims to primarily help the NBRB with medium-term inflation forecasting and policy analysis and related tools to effectively support policy making. The project composed of series of TA and training missions particularly focused on the preparation of forecasts and policy analyses, the medium-term forecasting and policy analysis model, and presentations of the forecasts and policy analysis.
International Monetary Fund. Monetary and Capital Markets Department

should be taken prior to the next mission. More detailed description of the key recommendations is provided in section B Recommendations and Future Steps towards Further Enhancement of the FPAS. Table 1. Key Recommendations Action Timing 2 Prioritization 3 Implementation Responsibility Comments Scheduling monetary policy meetings for the next year, including the timing of the forecasting round. Short Term 2 NBRB Board MPEAD Management QPM team NTF experts Before end-2018 and before the schedule is publicly available

International Monetary Fund. Monetary and Capital Markets Department

’s staff to simulate initial conditions reflecting the current situation in the economy and to compile a QPM-based forecast scenario as a part of a practical forecasting round at the NBRB in March 2018 . This main goal of the mission was accompanied by discussing and interpreting not only the baseline forecast scenario, but also alternative scenarios. The mission also worked with the QPM team on other elements of the FPAS, in particular the role of the QPM in the system, structure of meetings during the forecasting rounds, and the adoption of an interest rate

International Monetary Fund. Monetary and Capital Markets Department

enhancing the fiscal policy analyses and calculating the fiscal impulse is encouraging . Further analyses and testing may be needed, but the approach taken is promising. An iterative process among the fiscal sector experts and the QPM team is needed to properly estimate the fiscal impulse. 7. The newly developed recursive macroeconomic model can potentially provide the basis for a more structured approach to near-term forecasting . It can also potentially be used for disaggregating the output from the QPM. This may, however, require some simplification and a

International Monetary Fund. Monetary and Capital Markets Department
The NBRB has made substantial progress in improving its forecasting and policy analysis system (FPAS) and integrating it into monetary policy decision-making. The FPAS, and the model-based forecasts and policy analysis, is now well integrated into the policy-making process. Staff are well trained and have become experienced in using the tools developed for policy analysis and forecasting. The forecasting and decision-making process is well structured and has helped increase the two-way interaction between staff and the NBRB board—additional and less formal interaction between staff and board members in between the formal meetings may help enhance the process further.
Nils Mæhle, Tibor Hlédik, Mikhail Pranovich, Carina Selander, and Mikhail Pranovich

work gets limited to an almost mechanical “running of the model” by a small modeling team that lacks nowcasting and sectoral expertise. This puts excessive pressure on the QPM team and can cause important sectoral information to be overlooked, which can limit the quality and credibility of the analysis and lead to policy mistakes. High-quality forecasting and policy analysis requires inputs from a wide range of central bank staff. This calls for a close cooperation and ability to reach consensus within the FT, consisting of members of the core modeling team and often

Nils Mæhle, Tibor Hlédik, Mikhail Pranovich, Carina Selander, and Mikhail Pranovich
This paper takes stock of forecasting and policy analysis system capacity development (FPAS CD), drawing extensively on the experience and lessons learned from developing FPAS capacity in the central banks. By sharing the insights gained during FPAS CD delivery and outlining the typical tools developed in the process, the paper aims to facilitate the understanding of FPAS CD within the IMF and to inform future CD on building macroeconomic frameworks. As such, the paper offers a qualitative assessment of the experience with FPAS CD delivery and the use of FPAS in the decision-making process in central banks.