Matthew D. Shapiro, University of Michigan
Big Data - Implications for Central Banking
As big data and digitization affect many sectors and industries, central banks are also experiencing a paradigm shift where they combine surveys and big data. In his lecture in the IMFS Working Lunch series, Matthew D. Shapiro, Professor of Economics at the University of Michigan and Director of the Survey Research Center at the Institute for Social Research, shared his insights on how central banks could drive inferences from big data about the structure of the economy and the behavior of households and firms for policy actions.
In fact, “big data is not a new topic for central bank”, Shapiro stated, referring to the Fed’s Beige Book as very qualitative data on regional business conditions. In his view, the most progress in using big data for macroeconomic analysis had been made with high-frequency measures of real activity. There were also high-quality indicators from official sources on real economic activity such as employment, sales and GDP-basis data. However, he pointed out several shortcomings: The surveys are based on small and deteriorating samples, often there is a mismatch of price and revenue data and the revenues come with a high cost and burden. On the other hand, big data provides a ground truth for validating more novel measures. They also had granularity, which means that higher frequency and finer resolution at the geographical, product, or industry level could potentially lead to better informed decisions. Moreover, by getting closer to source data, real-time indicators might have better quality, Shapiro argued.
Nevertheless, making use of big data involved practical challenges for central banks as naturally-occurring data are typically more volatile than official statistics, or might confront economists with many sources of variation that were not present or had been smoothed out in official statistics.
So far, efforts by the Federal Reserve in the use of big data has focused on spending and employment. According to Shapiro, expanding the source of data on prices was likely even more important for the conduct of monetary policy. He called on the government and its statistical agencies to engineer a paradigm where households and business are willing to feed their data for statistical purposes much in the way they are willing to complete surveys. Moreover, this measurement improved by big data might have further implications: “Economists need to be open to the possibility that it might significantly alter assessments of economic performance”, Shapiro said.
Prof. Volker Wieland, IMFS und Sachverständigenrat
Aufbruch zu einer neuen Klimapolitik
Mit ihrer bisherigen Klimapolitik wird die Bundesregierung die Klimaziele für das Jahr 2030 nicht erreichen. Zahlreiche Vorschläge für eine neue Strategie im Klimaschutz liegen derzeit auf dem Tisch. Entscheidend ist nach Einschätzung des Sachverständigenrats zur Begutachtung der gesamtwirtschaftlichen Entwicklung ein einheitlicher Preis für den CO2-Ausstoß. Auf Anfrage der Bundesregierung hat der Sachverständigenrat seine Vorschläge für nationale Klimaschutzmaßnahmen in einem Sondergutachten zusammengefasst, das Prof. Volker Wieland in einer IMFS Policy Lecture in Frankfurt vorstellte. „Die zentrale Stoßrichtung des Gutachtens ist die Kosteneffizienz“, erläuterte Wieland. Da Treibhausgase aus dem Wirtschaftsgeschehen entstünden, könne man CO2-Emissionen nicht einfach verbieten wie einst FCKW.
Statt einer Steuer auf den CO2-Ausstoß befürworten die Wirtschaftsexperten die Ausweitung des bestehenden EU-Emissionshandel (EU-ETS) auf die Bereiche Gebäude und Verkehr auszuweiten. Die bisherigen Erfahrungen mit dem Emissionshandel sehen sie als Beleg, wie bei guter Wirtschaftsentwicklung Emissionen in einem funktionierenden System eingespart werden können. Ein planwirtschaftlicher Ansatz, wie bei einer CO2-Steuer, wirke oft nicht, wie man das erwarte, warnte Wieland. Das Ziel sei zudem ein anderes: „Es geht nicht darum, Einnahmen für den Staat zu generieren, sondern das Verhalten zu ändern“. Ein marktwirtschaftlicher Ansatz sei daher zu bevorzugen, wonach dort reduziert werde, wo es am effektivsten ist. Während bei einer CO2-Steuer der Preis für die Emissionen fest sein, werde im Emissionshandel die Menge festgelegt. „Umso höher der Preis für die CO2-Emissionen ist, umso größer wird der Anreiz, sie zu vermeiden“, sagte Wieland.
Um einen einheitlichen Preis für den CO2-Ausstoß in Europa zu erreichen, sollten nach Einschätzung des Sachverständigenrats spätestens 2030 alle relevanten Sektoren in einen umfassenden europäischen Emissionshandel integriert werden. Von einer Vorreiterrolle Deutschlands beim Klimaschutz rät Wieland jedoch ab: Dies könnte ein Trittbrettfahrerverhalten anderer befördern. Stattdessen setzt er in den internationalen Klimaverhandlungen auf ein gegenseitigen Geben und Nehmen. Denn im Klimaschutz sei klar: „Globale Koordination ist unverzichtbar“.
Folien zum Vortrag (PDF)
Ulrich Bindseil, European Central Bank (ECB)
Central Banking Before 1800 – A Rehabilitation
Usually, the Swedish central bank, founded in 1668, and the Bank of England (BoE) in 1694 are referred to as the oldest European central banks. In his Working Lunch, Ulrich Bindseil looked back at the origins of central banking, arguing against the prevailing view. Bindseil, who is Director General Market Operations at the European Central Bank (ECB), analyzed the charters of various earlier European continental institutions and examined whether these banks had a policy mandate and were based on a concept of central banking. Also the principle of lender of last resort, a key characteristic of constituting a central bank, is said to have developed only in the course of the 19th century.
According to Bindseil, however, already before 1800, more than 20 institutions fulfilled the definition of central banks. He found that the first institutions whose business model consisted in issuing central bank money with particularly short-term liabilities acting on the ground of specific policy objectives dated back to 1401 when the Taula de Canvi in Barcelona was founded, or the beginnings of several banks in the Italy, such as the Casa di San Giorgio in Genoa (1407), the Banco di Rialto in Venice (1587) or the Naples banking system (1580). Also the Hamburg Bank (1619) and the Nürnberg Bank (1621) rank among these early institutions. “Machiavelli referred to the Casa di San Georgio as a state in a state”, Bindseil explained their prominent position.
From the very beginning of central banking, lending to government is a recurring topic. The Casa di San Giorgio and the BoE both go back to the need of finding a framework for organizing the creditors of government. Based on his analysis of the pre-1800 central banks' balance sheet structure, Bindseil found that “the Bank of England from the beginning had a large loan given to the crown”. Also the Riksens Ständer Bank, the precursor institution of the Swedish Riksbank, had been financing the Swedish government during large periods of the 18th century. The first central banks were mostly established in democracies. As Bindseil further explained, there was a wide belief that central banks couldn’t be established in a monarchy with the Bank of England set aside as a constitutional monarchy.
Comparing the past with the current situation, Bindseils emphasized that the definition of eligible collaterals in the lending to private borrowers and the concept of a lender of last resort as a financial stability related function were constant topics over time. Altogether, in Bindseil’s opinion, the history of central banking goes beyond the Swedish central bank and the BoE. “If you apply these concepts then it’s hard to believe that central banking was invented by Riksens Ständer Bank”, he concluded.
Presentation: "Central Banking Before 1800 - A Rehabilitation" (PDF, 1,7 MB)
Dr. Michael Heise, Allianz
Inflation Targeting and Financial Stability
Over the last decades, government bond yields have been falling drastically in advanced economies along with long-term interest rates. In his Working Lunch, Michael Heise, chief economist at the insurance group Allianz, scrutinized recent developments in monetary policy and suggested building a broader index of price stability.
According to Heise, the general rule of thumb that the long-term bond rate should correlate with long-term growth of GDP no longer holds true. “Monetary policy and not fundamental factors has put down interest rates”, Heise said. Looking at the negative side effects of a low-interest rate environment, Heise warned against a situation as in Japan that suffered a balance sheet recession after a financial crisis. In Japan, the accumulation of non-performing loans (NPL) inhibited banks from giving new loans and zombie firms were kept alive.
Furthermore, as a consequence of the current low-interest rate environment in the euro area, asset prices and especially housing prices have been increasing. Simultaneously, risks were building up in investors' portfolios. According to Heise, the BBB components in investment grade indices were continuously rising. “Investors are going up the risk ladder, searching for yields”, Heise said. Imbalances are also building up in the target system.
Comparing the unconventional monetary policy measures of the European Central Bank (ECB) and inflation development, Heise concluded that “inflation has its own life”. In his opinion, the ECB should define price stability targets in a more adaptable way, moving the focus away from a simple year-on-year target for consumer price inflation.
Instead of relying exclusively on the Harmonised Index of Consumer Prices (HICP), Heise suggested building a broader index which also reflects inflation expectations. In Heise’s opinion, since in a financial boom risks are building up that could hit back when the economy is slowing down, the ECB should also put greater weight on developments in the financial cycle. According to Heise, “this is quite difficult and requires tough decisions but they need to be taken”.
Inflation Targeting and Financial Stability (PDF)