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Use of big data sources and applications at central banks

Summary:
Recent BIS Irving Fischer Committee report surveyed central banks on their usage of big data: will central banks catch up and radically transform the way they operate in order to fully reap the benefits of the information revolution? Or will their use of big data sources and applications progress only gradually due to the inherent specificities of their mandates and processes? To shed light on these issues, in 2020 the IFC organised a dedicated survey on central banks’ use of and interest in big data, updating a previous one conducted five years earlier. The survey focused on the following key questions: What constitutes big data for central banks, and how strong is central banks’ interest in it? Have central banks been increasing their use of big data and, if so, what were the main

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Recent BIS Irving Fischer Committee report surveyed central banks on their usage of big data:

will central banks catch up and radically transform the way they operate in order to fully reap the benefits of the information revolution? Or will their use of big data sources and applications progress only gradually due to the inherent specificities of their mandates and processes? To shed light on these issues, in 2020 the IFC organised a dedicated survey on central banks’ use of and interest in big data, updating a previous one conducted five years earlier.

The survey focused on the following key questions: What constitutes big data for central banks, and how strong is central banks’ interest in it? Have central banks been increasing their use of big data and, if so, what were the main applications developed? And finally, which constraints are central banks facing today and how can they be overcome? 

The survey’s main conclusions are the following:

    • Central banks have a comprehensive view of big data, which can comprise very different types of data sets.
    • Central banks are increasingly using big data.
    • The range of big data sources exploited by central banks is diverse
    • Big data is effectively used to support central bank policies.
    • The survey also underscored the need for adequate IT infrastructure and human capital.
    • Apart from IT aspects, there are many other challenges that central banks face. These include the legal basis for using private information and the protection, ethics and privacy concerns this entails, and the “fairness” and accuracy of algorithms trained on preclassified and/or unrepresentative data sets.
    • Moreover, a key issue is to ensure that predictions based on big data are not only accurate but also “interpretable” and representative, as to carry out
      evidence-based policy central banks need to identify specific explanatory causes or factors.
    • Cooperation could facilitate central banks’ use of big data,
    • International financial institutions can help foster such cooperation.
Amol Agrawal
I am currently pursuing my PhD in economics. I have work-ex of nearly 10 years with most of those years spent figuring economic research in Mumbai’s financial sector.

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