Increasing financial liberalisation and financial sector development can pose challenges to central banks and monetary authorities. Monetary policy has evolved to account for global and regional risks and spillovers, especially those emanating from the financial sector. Consequently, central banks in emerging and developing economies are prone to the inherent pro-cyclical nature of financial cycles which could exacerbate risks and spillovers and amplify macroeconomic volatilities. These effects complicate monetary policy management. But the success of monetary policy and macroeconomic policies rests on the ability of policy makers to explicitly account for macro-financial channels, and to monitor and assess the build-up of vulnerabilities in the financial system which could harm macroeconomic stability. This course aims to provide practical knowledge in understanding and assessing the macro-financial linkages through sectoral balance sheets, financial soundness indicators, synchronisation of business and financial cycles and asset prices.
By the end of the course, the participants will be able to (1) understand the foundations of macroeconomic modelling by using dynamic stochastic general equilibrium (DSGE) models; (2) trace macro-financial linkages using sectoral balance sheets; (3) understand various financial soundness indicators and macro-prudential tools; (4) appreciate the importance of financial cycles and their link with business cycles; and (5) know the link between monetary policy and asset prices.
The course is designed for middle-level officers or technical staff; whose work involves macroeconomic and financial surveillance and analysis. The participants should have at least two years’ relevant working experience and be familiar with basic macroeconomic concepts and theories as well as econometrics. Participants should have access and experience in using Dynare, EViews, MATLAB and Excel programme.
• Monetary policy and financial markets
• Introduction to dynamic stochastic general equilibrium (DSGE) models
• Modelling macro-financial linkages in a small open economy
• Measuring and assessing the interactions between business and financial cycles
• Cross-sectoral balance sheet analysis
• Early warning system and financial soundness indicators
• Macroprudential policies