Yves Mersch: Society forming changes and their impact on information
needs
Speech by Mr Yves Mersch, Governor of the Central Bank of Luxembourg, at the 2007
EUROSTAT Conference "Modern Statistics for Modern Society", Luxembourg,
7 December 2007.
* * *
In 1999 the late Eugenio Domingo Solans gave a speech in Luxembourg during which he
insisted on the importance of good statistics for the conduct of monetary policy. Since then
euro area statistics have considerably improved and yet, as users of statistics, we are
constantly requesting improvements of existing statistics or even the establishment of new
requirements.
So, are we users just experts in statistical harassment, as one may say, or are we modifying
our data requests because we need to do so?
I strongly believe that we need to do so because of the non-static nature of our modern
societies and the necessity to dispose of statistical data describing the underlying nature of
the changes to the stakeholders. Indeed, the economy that statistics are supposed to cover
is changing at an impressive speed and should statistics be useful, then they have to keep
up with the pace and adapt to the changing environment.
According to this view, one of the important roles of statistics is to provide policy makers with
data and tools necessary to assess the level of uncertainties and to provide common
reference points when entering decision-making processes. Only by using statistical data are
we able to clear the view and guess what is the best way forward thus optimizing the rules
versus discretion trade-off. So, statistical data collection, compilation and dissemination is
not an aim in itself but a necessity to achieve, and share, an efficient decision-making
process at all levels of society.
But, what are these changes that impact our need for information?
Commissioner Almunia has already provided some important definitions concerning modern
society and modern statistics. I would like to emphasis some factors requiring changes to our
societies today which find their origin in:
•
political and institutional changes
•
economical and financial evolution
•
exogenous factors
Political and institutional changes
During the last 50 years, the institutional set up has been subject to various changes such as
the creation of the IMF, the EEC, the OECD etc. Most of these new bodies required new
types of data compared with the data needed by previous institutions. The most recent
examples are the introduction of the single European currency and the creation of the
European Central Bank (ECB) which are at the start of new information needs. Indeed,
monetary policy is almost impossible without good statistics. Therefore, once European
States had decided to go in the direction of a Monetary Union, the point was not only to put
some people together in a room to take decisions but to enable that group of people to take
good and transparent decisions. In view of the different cultural backgrounds, different
operational and institutional frameworks were underpinned by different data requirements.
With a common policy making-set-up what would be the statistical adjustment requirement?
The only way forward was to establish a common framework for existing statistics as well as
developing a set of new statistics. This work started well before the start of Monetary Union
and there still remains room for improvement. In this regard, I would like to highlight the
important work done by the European system of statistics.
So, faced with a new type of user requirements (i.e. monetary policy for what is at present a
monetary union of soon 13 countries), the European Statistical System (ESS) and the
European System of Central Banks (ESCB) statistical services successfully established the
needed statistical framework. It was therefore important to define a set of harmonised data to
be collected by the respective national authorities, be they central banks or national
statistical institutes, in all of the euro area member countries.
At the same time it should be highlighted that most of these national institutions already
collected data for their own national needs and that the development of the euro-zone
statistical needs did not necessarily offset the national statistical requirements designed for
and evolved in a national policy-making environment. In this regard, it may be pointed out
that part of the existing national and euro area statistical needs are unfortunately not totally
coherent reflecting the transfer of monetary policy making to the higher European level while
retaining other areas of economic policy at the national level. In this regard, I strongly urge
users of statistics i.e. policy makers as well as compilers to reflect on the fact that reacting to
changing societies does not only imply the development of new statistics but also a strong
reflection on the need to maintain currently available "old" statistics. This phenomenon
probably reflects the inertia of existing institutions and the resistance of national
bureaucracies to transferring competences to the supranational level.
Very often these needs are defined without consultation of other institutions already
collecting data, or there is consultation, but minor differences concerning the data needs
used to collect different sets of data persist. What would be better would be to try to
overcome these differences and to collect a single set. A single set might not be perfect for
all the regulators concerned but it would be adequate and cost less.
Economic and financial evolution
During the debt crisis in Latin America in the late 1980's, most of the actors involved had to
accept the fact that they had been surprised by the crisis. In the aftermath of the crisis, the
IMF decided to introduce a new data standard, the Special Data Dissemination Standard, in
order to collect additional information on the situation of its member countries and to publish
this information much faster than it had been done in the past. This new data requirement
was felt necessary since it is supposed to better inform economic actors and therefore create
an early warning system for financial crises.
The "new economy" and its important productivity gains due to information technologies
generated the need for more detailed data concerning prices - for instance Hedonic prices to
capture ever faster changes.
The present crisis in the American mortgage market will also call for additional information.
Indeed financial innovation supposed to spread risk and thus liberate capital and increase
liquidity was found not to be stress resistant. Credit risk transfer with increased complexity
and dissemination in parallel decreased both access to information and the exercise of due
diligence.
The lack of transparency triggered a wave of mistrust impairing the proper functioning of
whole segments of financial markets.
It had been expected that the generalized phenomenon of the mispricing of assets had its
origin in some institutional developments such as Hedge funds or Private equity and
increased disclosure was requested in this direction. However, the unfolding of the
turbulence identifies a lack of transparency associated with the "originate and distribute"
model, the role of rating agencies and the limits to the supervisory boundaries.
The foreseeable response will be more disclosure, better information and increased
statistical coverage. In all, greater transparency.
Exogenous factors
The terrorist attacks on 11 September 2001 were also at the beginning of additional
information needs.
In the recent past, the US customs have requested more private information from people
travelling into the USA and most countries are now introducing new biometric passports.
In the same vein, the United-States, in the war against terror, requested as much information
as possible about financial transactions in order to reduce the financing of terrorists. Hence,
they obtained access to additional and mainly very confidential information on financial
transactions worldwide through SWIFT.
Where is the end?
Will we continuously increase data needs or are there limits?
There are at least two limits.
•
data production generates costs
The increasing data requests on the part of regulators generate increased
production costs and therefore decreases competitiveness.
•
privacy concerns
Access to more detailed data going as far as the data collected through SIWFT in
foreign jurisdiction raises concerns about privacy. Indeed, regulators and authorities
nowadays have access to more detailed information about individuals through
various databases established for taxation, war against terror, business statistics
etc. Not only is there a risk that we collect too detailed and confidential information
but also that these databases are interlinked. The constitutional checks and
balances have to be adjusted to these developments as well as our consensus
concerning the rights of an individual versus the rights of society as a whole.
Conclusion
The essential question is to know whether all these data requests are really necessary.
Indeed, is it necessary to collect so much specific and detailed data?
I think that is not the case and there are several possible ways forward in order to reduce the
associated reporting burden.
•
Better cooperation between regulators and the political will to abandon some very
specific and detailed requests made by a single regulator in order to build up
common needs and data requests.
• Collect more appropriate data: when introducing new data requests, statisticians
should review their needs in order to abandon those that are not important in order
to maintain the burden at an appropriate level and avoid increasing it constantly. It
should be said that policy makers must also accept a certain loss of detailed
information since policy makers are the driving force behind the data requests.
• Collect the important information and derive details on the basis of less frequent
surveys.
Thank you for your attention.