A Projection Model for Resource-rich and Dollarized Economy: The Democratic Republic of the Congo

Author: Victor Musa, Bertrand Gilles Umba, Lewis Mambo, Jonas Kibala, Christian Kandolo, Josephine Mushiya, Yannick Luvezo, Jules Nsunda, Grégoire Lumbala, Yves Siasi, Serge Mfumukanda, Lubaki Ange, Kabata Olivier, Luc Shindano, Dyna Heng, Diego Rodriguez Guzman, and Barna Szabo

Volume/Issue: Volume 2024 Issue 126

Publication date: June 2024

ISBN: 9798400280887

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Topics covered in this book

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Inflation , Economics- Macroeconomics , Resource-rich , Dollarization , Monetary policy , Inflation , Exchange Rate Policies , DRC QPM model , DRC economy , DRC's economy , Near-Term Forecast model , GDP data , Annex II , Output gap , Exchange rates , Mining sector , Exchange rate devaluation , Global

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Summary

The paper introduces a semi-structural Quarterly Projection Model (QPM) tailored for the Democratic Republic of the Congo (DRC), highlighting its resource richness and high degree of dollarization. We provide an overview of the model's specifications to elucidate key features of the DRC economy and present its properties, evaluating its alignment with DRC data and assessing its goodness of fit. Additionally, the paper demonstrates the QPM's practical application through a counterfactual scenario, comparing policy recommendations with the actual policy responses of the Central Bank of the Republic of Congo to observed exchange rate and inflation pressures in 2023. Beyond the QPM, the paper showcases supplementary tools that enhance its utility for generating medium-term forecasts and developiong narratives in support of monetary policymaking. Specifically, we introduce the Nowcasting and Near-Term Forecast models, designed to assess the economy in real-time and predict short-term inflationary trends.