Guatemala: Technical Assistance Report-The Statistical Component of Liquidity Forecasting

A Technical Assistance (TA) mission was conducted in Guatemala City, Guatemala, from June 12 to 16, 2023, to assist the authorities with the statistical component of liquidity management. The TA mission focused on time series analysis of the demand for liquidity and autonomous factors. Peculiarities in the set-up of the reserve requirement creates an interesting forecasting challenge that the mission addressed by forecasting each deposit type of the reserve requirement base and the demand for excess reserves by banks. Statistical reconciliation is then used to obtain an aggregated forecast. The reconciliation improves forecast accuracy. The TA report provides an overview of the results emanating from these tasks and provides key recommendations on using the statistical forecast to complement the institutional information and to check the quality of the information directly obtained from counterparties. The TA also recommended the publication of the forecasts, starting with the one-day horizon (for which forecast errors are limited), to help banks formulate a better-informed bidding at the daily deposit operations. Moreover, the report provides a detailed summary of the technical components of the liquidity forecasting model – which, in conjunction with a three-day workshop conducted during the mission on running the model – provides guidance to authorities on institutionalizing this model to routinely conduct liquidity forecasting.