Evidence-Based Policy: Progress and Next Steps[1]
Reception hosted by the Deutsche Bundesbank - Annual meeting of the Verein für
Socialpolitik
23.09.2019 | Leipzig | Claudia Buch
On behalf of the Executive Board of the Bundesbank, I would like to welcome you to this year's
reception on the occasion of the Annual Meeting of the Verein für Socialpolitik. We have just
heard some very interesting discussions on the role of central banks in the process of EU
enlargement. I would like to thank all the panelists for their contributions!
The discussion has shown that central banks play an important role in the European integration
process - not only within the euro area but also in the European Union as a whole. Let me give a
few examples of how the Bundesbank contributes as a constructive partner to decision-making in
Europe: Monetary policy decisions are taken at the Eurosystem level, based on analytical work of
committees within the European central banks to which the Bundesbank actively contributes.
Cross-border cooperation and coordination also play a central role for financial stability, which was
established as a new mandate for central banks after the financial crisis. In Europe, financial
stability falls under national responsibility but there is a close coordination between EU institutions
and national authorities. The European level has the power to top up national policy decisions
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which are deemed insufficient to address financial stability risks. [2] Likewise, banking supervision
is a shared responsibility: Even for the systemically important banks which are supervised by the
Single Supervisory Mechanism (SSM), national authorities play an important role in on-site
supervision. And, not least, we work closely with our partners in Europe to ensure that statistical
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reporting of granular data is improved across Europe. [3]
These examples show that good analytical skills are key for central banks to play a competent role
in the European integration process. Central banks certainly operate in an environment of political
discussions on important societal questions. Central banks' contributions to these debates need to
be based on their mandates and on rigorous empirical analysis. Maintaining high analytical quality
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is, indeed, one of the core strategic goals of the Bundesbank. [4]
Therefore, we have been very careful observers of the initiative for evidence-based policy that the
Verein für Socialpolitik (German Economic Association) has developed under the leadership of
Professor Monika Schnitzer from the University of Munich. The core principles of this initiative
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were adopted by the Verein in 2015. [5] According to these guidelines, economic policy advice
should be based on sound and rigorous evidence. The guidelines also point out that transparency,
replicability, neutrality and independence should be key aspects of impact assessments and ex post
policy evaluation.
A lot has happened since the initial adoption of these guidelines. Populism is on the rise, the
economy is becoming increasingly digital, trade tensions have intensified and we may even see a
reversal of globalization, there are concerns about climate change, and policy uncertainty
surrounding Brexit but also more globally. All of these challenges increase uncertainty and may
affect economic structures in the longer-term.
Evidence-based policy is needed more than ever. How else are we to answer key questions facing
society? We need to understand the drivers of inflation, productivity and growth, the role of
policy, the effects of post-crisis financial sector reforms, and, more generally, the effectiveness of
policies that internalize externalities - be it in the financial sector or with regard to environmental
spillovers. Not all of these questions can be answered with hard, causal evidence. But learning
how the economy is functioning, and understanding the mechanisms and incentives through
which policy instruments affect the way people and firms behave is crucial.
The best strategy to counter distrust in public authorities and the spread of "fake news" is a
structured policy process. We need transparency about what policy institutions are doing and how
they operate, not least through good communication. Notwithstanding the erosion of trust in
governments and political institutions since the crisis, there is indeed great demand for reliable
evidence and expert knowledge. According to a survey by the Pew Research Center, for example,
demand for scientific knowledge in the United States is fairly high and has even increased slightly
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in recent years. [6] Yet, views diverge regarding the roles scientists should play in policy debates;
potential biases and lack of independence in expert views are issues that many respondents
consider to be relevant. Trust is thus important, and trust needs to be earned. Trust also implies
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that citizens want a transparent and objective decision making process. [7] Therefore, we have
taken the principles for evidence-based policy to heart and are working on operationalizing them
in the policy areas for which we are responsible.
Generally speaking, a lot has also happened with regard to evidence-based policy making over the
past few years. Let me give you an example: Very nearby, the Halle Institute for Economic
Research founded a Centre for Evidence-based Policy Advice (IWH-CEP) in 2014. This platform
aims to create better foundations for the evaluation of policy measures, including the effects of
regional policies. Research based on firm-level information on subsidies shows that such subsidies
support the creation of new employment while the productivity of the recipient firms remains
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largely unaffected for the time span covered by the data. [8] Of course, this is only one of the
many examples of how research institutes in Germany contribute to evidence-based policy-
making.
Moving on to the national level, the 2018 coalition agreement foresees an evaluation of policy
measures in a wide range of areas such as integration in schools, traffic laws and fines, cultural
policy, an initiative to promote healthy diets and increased physical activity, programs to prevent
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political extremism, as well as data protection regulation. [9] An important step towards
operationalising policy evaluation and making it part of the policy process has been made by an
initiative of the National Regulatory Control Council (Normenkontrollrat): Since March 2013, all
national policy measures with annual implementation costs of more than € 1 million must be
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subject to ex post evaluation. These evaluations are reviewed by the Council. [10]
Implementing these initiatives requires an active exchange between the fields of academia and
policymaking, learning and experimenting. In order to promote this dialogue, the German
National Academy of Sciences "Leopoldina" has established an initiative for evidence-based policy.
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[11] It aims to improve the transparency of political processes and to establish common
standards on how policy measures should be evaluated. The initiative builds on an exchange of
views between academia, administration, the media, and the political sphere through workshops,
joint events, and (informal) networks.
Another example of evidence-based policy comes from the international level: In 2017, the G20
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endorsed a framework for the ex post evaluation of financial sector reforms. [12] In response to
the global financial crisis, the G20 leaders agreed on a package of financial sector reforms with
four elements: increasing resilience through higher capital requirements for banks, new regimes
for the resolution of large and systemic banks, reforms of derivative markets, and improved
monitoring and regulation of shadow banking. The objective of the evaluation framework is to
attribute outcomes of reforms, to identify relevant heterogeneities with regard to reform effects,
and to study broader, general equilibrium effects. First evaluations have already been conducted.
They find that, by and large, the reforms are working as intended and do not have major side
effects. In an ongoing evaluation project, the FSB members assess whether the reforms addressing
the too-big-to-fail issue are reducing the systemic and moral hazard risks associated with
systemically important banks. The evaluation projects benefit from academic support through
dedicated academic advisors; input from stakeholders is actively sought through public
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consultations. Hence, you are all invited to engage! [13]
What are the key lessons that we can take away from these examples of evidence-based policy?
What are the elements of a good evaluation process?
Institutional knowledge and methodological diversity are the basis for good policy evaluations.
Sound, evidence-based policy making needs to be based on a range of studies and methods.
Different empirical models which have been replicated across different markets and time periods
can provide insight into the robustness of empirical findings. Repositories of evaluation studies can
provide overviews of empirical work and also provide the basis for meta studies. The Bank for
International Settlements (BIS), for example, has recently launched a repository of studies on the
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effects of banking regulation. [14] In addition to analytical and empirical methods, good
identification requires information about the relevant institutional background. Not least,
sustaining the political momentum requires evaluation to be embedded in a policy process. This
creates the incentives for administrations to actively support evaluations, both internally and
externally.
Sound evidence-based policymaking requires high-quality data: Data are needed early on in the
process of policy evaluation, as collecting relevant data ex post can prove costly and inefficient.
The Bundesbank thus actively supports the provision of granular data for research purposes. The
Bundesbank's Research Data and Service Centre (RDSC) provides access to granular financial data.
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[15] At the moment, researchers involved in 125 projects are working with RDSC micro data. To
further facilitate access to these data, the RDSC has recently opened another site at our regional
office in Düsseldorf. Furthermore, the Bundesbank is supporting a RePEc (Research Papers in

Economics) initiative to highlight the value of data in empirical work. [16] The idea of the
initiative is to automate the search and discovery of datasets in the same way information on
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publications and citations can be collected. [17] In the context of improving the infrastructure for
good data, let me take this opportunity to thank Regina Riphahn (University of Erlangen-
Nuremberg) and Thomas Bauer (RWI Essen) for their work for the German Data Forum (Rat für So-
zial- und Wirtschaftsdaten).
Academic involvement is important: Causal identification of policy effects is at the heart of
academic research. This is a very welcome development as it adds rigor, quality, and comparability
to academic output. Yet, translating evidence based on causal identification strategies into sound
policy advice requires much more: external validity and robustness of results over time and across
different institutional setups is important. Adding such information and deriving broader policy
implications from one's own work is not always rewarded by the academic community, though.
Hence, we also need to think intelligently about ways to combine both - analytical rigor and
quality controls with incentives to transfer knowledge from academia to policy.
Footnotes:
1. I would like to thank Stefan Bender, Manuel Buchholz, Philipp Marek, Christian Schumacher,
Edgar Vogel, and Matthias Weiß for most helpful contributions and comments on an earlier
draft. All remaining errors and inconsistencies are my own.
2. The European Systemic Risk Board is tasked with the macroprudential oversight of the financial
system within the European Union; it can issue warnings and recommendations to mitigate
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systemic risks ( https://www.esrb.europa.eu/about/html/index.en.html ). The ECB has the power
to apply, if deemed necessary, more stringent measures than adopted nationally to address risks

to financial stability (
https://www.ecb.europa.eu/pub/financial-stability/macroprudentialmeasures/html/index.en.html ). Regarding macroprudential policy decisions, the Governing
Council of the ECB is supported by the Financial Stability Committee (FSC), which comprises
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representatives of the ECB and national central banks and supervisory authorities (
https://www.ecb.europa.eu/ecb/tasks/stability/framework/html/index.en.html ).
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3. For details, see https://www.ecb.europa.eu/ecb/tasks/stability/html/index.en.html .
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4. See
https://www.bundesbank.de/en/bundesbank/organisation/mission-statement-andstrategy/the-bundesbank-s-mission-statement-618248
5. See "Leitlinien und Empfehlungen des Vereins für Socialpolitik für Ex post-Wirkungsanalysen" as
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of 6 September, 2015 (
https://www.socialpolitik.de/docs/VfS-Leitlinien_Ex_postWirkungsanalysen.pdf ) and Michael Burda, Monika Schnitzer, Bernd Fitzenberger, and Christoph
Schmidt (2014), Evidenzbasierte
Wirtschaftspolitik, Thesenpapier zur Kerntagung des Vereins für Socialpolitik in Hamburg 2014;
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https://www.socialpolitik.de/En/guidelines-evidence-based-policy .
6. Cary Funk, Meg Hefferon, Brian Kennedy, and Courtney Johnson (2019), "Trust and Mistrust in
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Americans' Views of Scientific Experts", Pew Research Center. 2 August, 2019.
https://www.pewresearch.org/science/2019/08/02/partisanship-influences-views-on-the-roleand-value-of-scientific-experts-in-policy-debates/.
7. OECD (2017), "Trust and Public Policy: How Better Governance Can Help Rebuild Public Trust",
OECD Public Governance Reviews, OECD Publishing, Paris.
8. Brachert, Matthias, Eva Dettmann, and Mirko Titze (2018), "Public Investment Subsidies and
Firm Performance - Evidence from Germany". Journal of Economics and Statistics, Vol. (Volume)
238(2): 103-124.
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9.
https://www.bundesregierung.de/resource/blob/975226/847984/5b8bc23590d4cb2892b31c987ad672b7/20
03-14-koalitionsvertrag-data.pdf?download=1
10. See Normenkontrollrat (2018), „Deutschland: weniger Bürokratie, mehr Digitalisierung, bessere
Gesetze - Einfach machen! Jahresbericht 2018, Berlin. The Normenkontrollrat
Baden-Württemberg has recently established a network of academic advisors, which is hosted by the Institute
for Applied Economic Research (IAW) in Tübingen (press release of 5. August 2019:
„Wissenschaftsministerium fördert Netzwerk für gute Rechtsetzung und Bürokratieabbau").
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11. https://www.leopolidina.org/themen/thema-evidenzbasierte-politikgestaltung/
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12. https://www.fsb.org/work-of-the-fsb/implementation-monitoring/effects-of-reforms/
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13.
https//www.fsb.org/2019/05/fsb-launches-evaluation-of-too-big-to-fail-reforms-and-invitesfeedback-fram-stakeholders/
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14. See Financial Regulation Assessment: Meta Exercise ( https://stats.bis.org/frame/ ).
15.
https://www.bundesbank.de/en/bundesbank/research/rdsc/research-data-and-service-centrerdsc--617900.
16. The Bundesbank is part of Coleridge's Rich Context work stream,
17.
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https://blog.repec.org/2019/09/01/new-initiative-to-help-with-discovery-of-dataset-use-inscholarly-work/