07 décembre 2017

Understanding and improving the role of central banks in developing and emerging countries

The Bilateral Assistance for Capacity Building for Central Banks (BCC) programme, headed by Professor Cédric Tille, was awarded another five-year grant to continue its work with central banks from abroad. This is an acknowledgment of the past work the BCC has been doing in helping central banks build capacity by giving technical assistance and research training. More with Professor Tille.

What does the BCC do?

The BCC is part of the effort by SECO (Swiss Secretariat for Economic Affairs) through their overall programme for macroeconomic support. Across many countries they have a range of activities and financial support programmes designed to build policy capacity. There are for instance programmes with ministries of finance, and our programme is the one focused on central banks. The idea is to have central banks develop the capacity to do policy on a stronger basis and improve macroeconomic management. This covers a broad variety of topics, including modelling and statistical analysis, and more practical topics such as building databases or planning for disaster recovery in countries that are in seismic zones. The planning covers what to do if a big earthquake strikes, how the central bank can keep operating. It is thus a fairly wide range, not just standard macroeconomic training.

We organise technical assistance missions, conducted by experts that we select from a broad pool. These experts go to the central banks for a week. The missions are planned on a multi-year basis, so that after a couple of years they add up to an ultimate objective, for instance that a country has a set of models that they could run themselves. Instead of simply giving them something off the shelf and telling them what they have to do, our purpose is to help them develop their own tools in order for them to get ownership and use them. There is little point in giving them a model that ultimately will not be used as they don’t know how to maintain it.

We also support capacity for research, which includes coaching and visiting. Staff members of central banks submit some projects, which are basically research papers. We select them to come for a semester to the Institute, where they work on their project and take some courses with the goal of delivering a working paper after six months. They are matched with a faculty member at the Institute but also sometimes, more broadly, with a specialist on the topic. For example we previously relied on supervisors from the University of Fribourg and from the Swiss National Bank in addition to the Institute. As it can be costly for a central bank to send someone here for half a year, because this person is not operational for that period, we offer another coaching option: the researcher stays in his or her country and is followed at a distance by a faculty member; he or she comes to Geneva about half-way through the six months for a week to work on the topic. With this option, of course, we have to ensure that they have enough time to work on their research, and are not too much absorbed by their daily work.

Another element of the BCC is a research conference held once a year in Geneva. It includes a workshop where research papers by staff members are presented. They get feedback from their colleagues from the other countries, and from academics more broadly. We find this to be very useful as it helps develop a peer network. For example, someone from a country works on building a housing price index, and someone from another country wants to do the same thing. They can help each other beyond our input as academics, as having someone who has concretely handled the issue is very helpful and complementary. The second part of the conference is on a specific theme. For instance in 2017 we covered macroprudential measures. The idea is to take stock of the issue, with an academic or someone from a policy institution giving a keynote lecture, followed by a series of panels. The panellists include senior people from central banks from our network, but also from policy institutions beyond, and senior academics. We are very happy that we could attract people at the level of governor or vice-governor, which for us is a very strong positive signal of the usefulness of our work. For instance, the Swiss National Bank always sends someone from the enlarged governing board to participate.

Finally, we support workshops and conferences in the countries themselves, with a more regional focus. In 2016 we helped organise one in Cartagena, which led to a conference volume in a scientific journal. We managed to attract very good people and give the central banks a closer connection to people in academia.

Talking about the research pillar, you said that in general the participants come with their own research topics. How do you select the participants?

They submit an application and we look for projects that can be realistically completed. It can happen that researchers want to achieve a lot in a very short time (six months), so we have to make sure they aim for a realistically deliverable outcome, otherwise they will become demotivated. A second point in the selection process is that the project should be a good fit with the priorities of the central bank. For instance, if someone wants to submit a paper that is on some theoretical topic outside monetary policy, we would not select it despite its interest because it is not what the central bank does. The challenge we always have in the BCC is to increase not only the human capital of the individual, but also that of the institution. We have to be careful that we don’t train someone who would then leave. In general, it’s good when people get trained and then follow advanced degrees, but we have to be careful that there is no dilution of human capital. Having a project that is really a part of the central bank’s priorities is a way to ensure that.

Are you looking more at empirical research that can be applied to the central bank’s daily operations and less at theory?

Theory would be fine for instance if someone would like to build a model of the financial accelerator in a country. But it is important that the central cank considers the topic as a priority. What I would be careful about is having someone wanting to publish research just to get better job opportunities outside the central bank, because we want to build the capital of the institution. If the people we’ve trained leave soon after, we would not be meeting the purpose of the BCC.

How is the relationship between the supervisors and the participants organised?

It’s basically similar to supervising a master thesis. Obviously, if it’s at a distance, they can interact a bit less regularly. A challenge we’ve discovered over the past five years is that people coming from central banks are not so used to academic functioning. Especially when they are connected with well-known faculty member, they may refrain from approaching their supervisor until they have a first draft of the paper. We have to explain them that they instead have to approach the supervisor early on, as it is the whole point. Overcoming this timidity of participants not wanting to disturb a “big” professor with just a rough idea can be a challenge. We have to clarify that this is precisely why the supervisors are there. By now we are careful to explain this, so that the researchers interact with their supervisors here, or through Skype or email.

How many visiting students, or visiting central bankers, do you have per year?

In the first phase (five years) we have received up to 40 papers. One thing we’ve learned, especially in the coaching option where people are not here, is the importance to put in the time to keep track on the projects. Of course, we have the supervisor who is doing that, but she or he is focused on the scientific part, and supervisors have a very busy schedule. We’ve realised that we need to actively ensure that people remain on track. With that in mind, we’ve decided to refocus a bit in the coming phase and host two visitors and four coachees per year.

As I mentioned earlier, we look at the adequacy of the project with the central bank’s broader objectives. We also make sure that all the countries are fairly represented. We have a broad set of countries, with the technical abilities of staff in some being more advanced than in others. There is then a risk to overrepresent some countries if our selection is only based on projects. Capacity building also means that when we receive projects that are promising but rough we help researchers take their promising ideas forward.

Is there anything you want to add?

The BCC being an applied programme, the challenge is to make sure that at the end of the phase the output of these efforts (for example a model built) are actually used. The BCC managers, who are very much in touch with the countries, ensure that the activities are implemented, but also have an understanding of the workings of the central banks. Each institution has different departments and we need to understand their interactions. We need to get a sense of what projects are feasible. Some projects can be very interesting but may not prove feasible while less ambitious ones may have better odds of completion. In several countries we got very good feedback from the governor or vice-governors on the usefulness of our projects for the bank. That kind of feedback tells us that our work delivered a product that will be really used in the future.

Visit the BCC website >

Illustration: participants in the BCC fifth annual conference, “Macroprudential Policy: Taking Stock of the State of the Art, and Ways Forward”, 21–22 September 2017.