big data & machine learning applications for central banks closing remarks by daniele franco deputy governor of the bank of italy rome, 22 october 2019 the workshop on ‘ big data & machine learning applications for central banks ’ is coming to an end. let me begin by thanking the speakers, discussants and participants. this is the third workshop organized by banca d ’ italia on these issues. and it will not be the last. why are we so interested in these topics? a few days ago, the chairman of the federal reserve, jerome powell, noted that monetary policy is data dependent. it is adjusted over time in response to new information about the state of the economy. monetary policy must be based on timely and accurate data. this is why central banks have always made great efforts when it comes to collecting and analysing data. throughout its history, banca d ’ italia has drawn extensively on data published by the national statistical institute and other national and international agencies. but it has also been an active producer of statistics, not only on banking, financial and fiscal variables, but also on firms and households. banca d ’ italia has collected micro - level statistical information on companies since the early 1950s. back then only a few aggregate statistics were available. we began by surveying the balance sheets of a small group of firms, an activity that was progressively expanded until it became what is now the survey on industrial and service firms. these days, we collect detailed data on about 5, 000 firms. in the early 1960s, the bank started the survey on household finance. this survey allows us to study the distribution of income and wealth at the micro level in order to analyse the preferences of individuals and the determinants of their economic and financial decisions. in recent years, we have interviewed about 8, 000 households in each survey. the digitalization of the economy is changing our lives, the organization of production and our jobs. it also poses new challenges, requiring changes in the way central banks collect and analyse data. the typical indicators used by central banks to measure inflation, investment or economic activity may not fully capture the changes determined by digitalization. for example, online shopping has caused a disruption in the retail sector around the globe along with changes in pricing behaviour. when measuring inflation we should take account of the prices of online stores such as amazon or ebay. gross domestic product is one of the pillars of macroeconomic statistics. it is still the most important measure of economic activity and wellbeing. however

raise the growth potential of the economy gradually to about 6 per cent by the year 2000. the gear programme is now again criticised from some quarters as being too restrictive, and is even regarded by some critics as an abortion of the rdp. to be realistic, however, it will not be possible to provide in the demands of the rdp without also implementing the programme of gear. great progress has also been made in re - integrating south africa in both the political and economic global environment. on the political side, south africa is now again a full member of the united nations, has been readmitted as a member of the british commonwealth and joined the organisation of african unity and the united nations economic commission for africa. on the economic front, south africa is fully engaged as a respected member in the activities of the world bank and the international monetary fund, has joined the african development bank, and has entered into a number of bilateral and regional economic co - operation agreements. the south african financial markets are being opened up for foreign competition ; the tariff structure on imports is under major revision ; the government, parastatals and private sector corporations have become major borrowers in the international capital markets, and a market in eurorand bonds developed outside of south africa where total borrowings in excess of the equivalent of us $ 4. 1 billion are now outstanding. on the negative side, south africa has made little progress in addressing the urgent unemployment problem. in fact, over the past seven years, total employment in the formal non - agricultural sectors of the economy declined by 421, 395 workers. what growth there was in the economy, was brought about by new technology, capital investments and productivity increases, and not by any additional employment. the best estimates available indicate that at this stage, about 30 per cent of the economic active population of the country is unemployed. closely linked to the unemployment problem is the rising rate of crime and violence in the country. the need for urgently addressing this problem is now recognised by government as the major challenge for securing almost all the social, economic and political objectives of the new south africa in the longer term. recent steps taken by government in this regard include the provision for the additional employment of 5, 250 policemen, and the appointment of a prominent south african business leader, mr meyer kahn, as administrative head of the police force. 2. major economic developments over the past three years as already indicated, the south african economy was in an upward phase of the business cycle for the past three years