May 10, 2016
Policy formulation and communication challenges shared by central banks in Caucasus and Central Asia were hotly debated by participants from four regional countries at a high-level workshop held at the National Bank of Georgia in Tbilisi last week.
OGResearch, which has assisted a number of regional central bank in modernizing their inflation targeting policy frameworks, was the leading organizer of the event.
Led by OGResearch's Managing Partner David Vavra and Senior Policy Expert Marek Petrus, the workshop focused on building the case for enhancements to the policy formulation and communication toolkits at the Bank of Mongolia (BOM) and the National Bank of Kyrgyz Republic (NBKR). High-level officials from the Central Bank of Armenia, and the host institution, the National Bank of Georgia (NBG), also took part in the event.
The European Bank for Reconstruction and Development supported the workshop as part of a technical cooperation project.
During interactive debates around the workshop roundtable in Tbilisi, central bankers agreed that while approaches to organizing modeling and forecasting processes may have converged over time, no single template exists for ensuring successful central bank communications.
A growing number of central banks have benefited from embarking on regular, pro-active communications, aimed not at improving their public image, but squarely at steering expectations to their policy objectives in order to achieve their legal mandates. One of the main takeaways was that each individual central bank needs to find its own way forward in building its communications function, because central bank structures, the composition of policy-making bodies and decision-making practices vary across countries, as do key stakeholders and public audiences, and also communication challenges.
As for policy formulation, participants agreed that the true monetary policy art is to act bravely and pre-emptively, in spite of risks and uncertainties regularly surrounding the outlook for policy. To be able to perform at that level, policymakers need sound and quality macroeconomic analysis as an input for policy decisions from their own staff, which is a key area of OGResearch's consulting expertize.
"The central bank has to make painful decisions in the short term to achieve benefits in the long term. Communicating that when the public isn’t able to foresee the long term is a difficult challenge," said NBG's Vice Governor Archil Mestvirishvili, who - in a keynote speech - shared the NBG's experience in coping with an external shock in a small, dollarized economy with the workshop's participants.