The article I read was called "A real-time revolution will up-end the practice of macroeconomics" and was found on the Economist. The article talks about how data that central banks use such as GDP and productivity are data sources that lag behind because of how long it takes to compile that data. They then use that data to make big policy decisions that can affect millions of people. If the data is bad or is received to late it can lead to bad decisions that can ruin an economy. An example used in the article is if the Fed could have had real-time data in 2007 they could have cut interest rates to 0 then which would have helped the economy out a lot.
According to this article these changes to using real-time data could be happening sooner then we think. The pandemic started central banks and governments had too use other forms of information like tracking contactless payments , and JP Morgan giving them information on peoples bank accounts/credit cards to see if they are spending money or not. This is instead of the official surveys they normally use that take time to make.
There are obviously some issues that arise with using real time data. One of which is what if the central bank overreacts to a data trend that may just be an anomaly? They could then hurt the economy by over adjusting when it doesn't necessarily need it. Could it also lead to a more centrally planned economy if there is adjustments and interventions every day with the daily data? Some very interesting things to think about.
https://www.economist.com/leaders/2021/10/23/a-real-time-revolution-will-up-end-the-practice-of-macroeconomics
2 comments:
I think that the thought of using real-time data would be a great change to the way the fed runs. This obviously would be something that we have never done before and would take time to get used to and time to make the most efficient and correct decisions. I think this is an extremely interesting idea and would be interested in seeing the different outcomes this would create for the US economy, good and bad.
Using real time data would be a great transition for the Feds. Having access to real-time data would potentially allow for the Fed and other large banks to prevent or quickly resolve economic struggles. I think that your comment about overreacting can be applied to how the Fed and banks currently work. The Fed can overreact about economic data which can result in significant issues, however, having real-time data may also supplement their current processes and allow for quicker turnarounds during recessions.
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