njuguna ndung ’ u : the methodology of collection, compilation and analysis of international remittances statistics remarks by professor njuguna ndung ’ u, governor of the central bank of kenya, at the regional course on “ the methodology of collection, compilation and analysis of international remittances statistics ”, nairobi, 17 november 2014. * * * dr. sehliselo mpofu, director, macroeconomic management programme – mefmi ; distinguished facilitators and mefmi staff ; delegates ; ladies and gentlemen : it is a privilege for me to join you on this important occasion of the official opening of this regional course on “ methodology for collection, compilation and analysis of international remittances statistics ”. allow me from the onset, to extend a cordial welcome to you all on behalf of the government of kenya. we are indeed honoured and happy to host this important activity here in nairobi, kenya. i would like also to extend a very special welcome to the delegation from mefmi. we are honoured to host one of your capacity building events this year. as always this has attracted a high level of interest and attendance, an indication of the perceived need to bridge the existing capacity gaps in the compilation of remittances statistics. let me also thank the distinguished resource persons, dr. emmanuel kumah, who was formally of the imf statistics department, and mr. moris mpofu from the reserve bank of zimbabwe for accepting to bring their expertise to this course. i am confident that their vast knowledge will enable them to share experiences in this critical policy area and contribute immensely to the enhancement of skills in the mefmi region. as you are all aware, international remittances have grown to become significantly important in providing foreign exchange and financing. they, particularly, support millions of poor recipients. we cannot therefore afford to ignore the quality of data for such an important contributor to economic growth and development. until recently, unlike other countries with significant numbers in the diaspora, we in africa have paid little attention to the role of remittances in our development thinking. this must now change. there is increasing awareness of the importance of these remittances due to the fact that, unlike other financial flows, remittances mostly go directly to households, either for investment or consumption smoothing. therefore, they have important poverty alleviation benefits. the critical questions are therefore how much of this money is coming into

central banks ( or what governor mervyn king of the bank of england has termed “ inflation nutters ” ) would give no weight to short - term output considerations in the conduct of monetary policy. most central banks, including the sarb, regard themselves as flexible inflation targeting institutions. by this we mean that there is factored into our decision - making systems concern about what the output costs of our monetary policy actions are going to be. in the jargon of economists, there is some weight on output variability in the bank ’ s objective function. the inflation objective is not discarded, but rather there is a more pragmatic approach to the speed with which inflation is brought back to within the target range. however there is a trade - off between an excessively long period, which would reduce credibility and raise questions about the commitment of the monetary authorities to low inflation, and an excessively short period in which real costs may be high. the rest is judgement for which a central bank must and shall be held accountable. inflation targeting has been an increasingly popular framework since it was first adopted by new zealand in 1990. most studies have shown that it has been a useful framework for assisting in bringing down and maintaining inflation at low levels. currently inflation targeting is probably facing its most severe challenge, as international oil prices have quadrupled since the beginning of 2004, and global food and other commodity prices are experiencing persistent strong increases. whereas a few years ago most countries were within their inflation targets, this unfortunately and regrettably is not the case today. the latest data show that 3 out of 7 industrial countries, and 4 out of 16 emerging market economies are within their targets, although the extent and persistence of the deviation differs somewhat. does this mean that inflation targeting has failed? the true test of the framework will be whether inflation expectations can be sufficiently anchored to weather the current inflationary pressures, and facilitate a return to within the officially set targets. 3. dealing with shocks the nature of the original cost pressures that are facing the economy is well known. these pressures – food and energy – do not appear to be cyclical. this might be a debatable assertion. we are facing a significant and probably a permanent change in relative prices globally. we also have to be concerned about pricing and unit labour cost responses to these relative price changes. if producers simply pass on these increases, and if wages increase to compensate labour for these increases without higher levels of productivity growth, and if we allow this process to take effect