Lao Macroeconomic Model Sthabandith Insisienmay Center for Macroeconomic Policy and Economic Restructuring National Institute for Economic Research Regional Capacity Building Workshop Formulating National Policies and Strategies in Preparation for Graduation from the LDC Category 14-16 November 2017, Thimpu, Bhutan.
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Lao Macroeconomic Model
Sthabandith Insisienmay
Center for Macroeconomic Policy and Economic RestructuringNational Institute for Economic Research
Regional Capacity Building Workshop Formulating National Policies and Strategies in Preparation forGraduation from the LDC Category14-16 November 2017, Thimpu, Bhutan.
Outline
1. Rational2. The Evolution of institutional/model
conceptual frameworks/forecasting methods
3. Current Macroeconomic Model/Framework4. Difficulties to apply model results for
actual policymaking and implementation5. Modeling framework for SDG and Way
forward
Rational
1
Rational
The government adopts short and medium term planning for Lao socio-economic development under NEM.
The need for easy tool understandable by policy makers for monitoring the plan and provide economic outlook.
To create common understanding on economic inter-linkage between macro sectors and cross check consistency of sector planning among concerned government agencies.
The Evolution of institutional /model conceptual frameworks /forecasting methods
2
Key stakeholders
Bank of Lao PDR (BOL) National Statistic Bureau (LSB), MPI International Organizations (World Bank, IMF) Center for Macroeconomic Policy and Economic
Restructuring (CMER), NIER. Other line Ministries (unpublished reports)
Purposes of the Involvement of Stakeholders
- Data sharing- Creating consensus on
the estimated and forecastedmacroeconomic indicators
- Aligning forecasting results and creating synergy among stakeholders, particularly the WB
- Strengthening stakeholders’ network and dialogue on Macroeconomic issues
- Providing policy recommendation from the simulation and forecasting results
- Model development- Creating network and
understanding on the use of model for policy planning
- Capacity buildings
2011MMWG established under Macroeconomic Division of
NERI of the MPI
2014MMWG extended, Modeling Division established under
NERI
2016NIER established as an
independent government research institute
Evolution of Conceptual Framework
2011MMWG established under Macroeconomic Division of
NERI of the MPI
2014MMWG extended, Modeling Division established under
Overall balance -2,818 -3,623 -6,971 -2,442 -2,602Money and credit (in billions of kip)
Reserve money 19,086 20,495 22,523 26,542 30,041Broad money 48,069 58,671 64,733 74,318 84,115Bank credit to the economy 44,527 52,293 63,169 64,158 66,538Bank credit to the private sector 34,599 40,996 50,146 49,490 49,327
Balance of payments (in millions of U.S. dollars) Current account balance -1,187 -2,124 -1,311 -918 -630
Exports of goods 2,662 2,769 3,008 3,578 4,182Imports of goods 4,271 5,233 4,612 4,747 5,002
Capital and Financial Account 1,608 2,813 1,890 1,844 1,851Balance of payments 145 308 202 581 854Gross official reserves 815 986 1,188 1,769 2,623
In months of prospective goods and services imports 1.7 2.2 2.6 3.6 5.1Public debt
In millions of U.S. dollars 6,575 7,045 7,352 7,755 8,173In percent of GDP 48.6 48.6 47.9 46.0 43.3
Exchange rate Official exchange rate (kip per U.S. dollar; period avge) 8,024 8,090 8,151 8,201 8,250
Nominal GDP In billions of kip 90,823 100,702 108,709 122,409 134,041In millions of U.S. dollars 11,318 12,448 13,336 14,927 16,247
Difficulties to apply model results for actual policymaking and implementation
4
Difficulties
Background and interest of policy makers Get them involved with the modeling process Need regular meeting/dialogue with stakeholders/policy
makers.
Limitation of macro model to explain the results in a more disaggregate level Disaggregate as much as possible Supplement the macro model with a micro-foundation
typed model
Modeling framework for SDG and Way forward
5
Modeling Framework for SDGs and Way Forward
Current macro models might only cover areas related to goal 8 (decent work and economic growth) and 9 (industry, innovation and infrastructure), not including social and environmental aspects.
To integrate SDGs into a macro model/framework is challenging particularly the goals related to poverty (goal 1), education (goal 3), health (goal 4), energy (goal 7), inequality (goal 10) and climate change (goal 13) into the macro model or framework. Need to identify potential or applicable indicators.
This requires more blocks of micro models (highly disaggregated) joined into macro models
Modeling Framework for SDGs and Way Forward
Other option: Computable General Equilibrium (CGE) or micro-simulation
models might be desirable to link macro model, SDGs and policy analysis since these models can handle with disaggregate levels such as households and firms from the survey.
But that is time consuming and requires skills (economics and programming) and computable software package.
Macroeconomic Framework might be extended to cover blocks related to SDGs.
Full package of capacity building including technical assistance from ESCAP is strongly needed: to provide training, technical Assistance, software, etc.
Special WG or taskforce to strengthen the cooperation across member States and experts in the area of macroeconomic modelling for SDGs in Asia and the Pacific