Statistics and their use by central banks
Eugenio Domingo Solans, Member of the Executive Board of the ECB,
Keynote speech at the 2nd ECB conference on Statistics. Frankfurt am Main, 23 April 2004.
It is my pleasure to participate in this 2nd ECB Conference on Statistics. As the Executive Board member of the European Central Bank (ECB) in charge of the Directorate General Statistics, I should like to begin by thanking the organisers and all the participants in this conference for their valuable contributions.
With the end of my term as Executive Board member drawing near, allow me to use this opportunity to repeat some views that I have formed from my experience at the ECB.
The business area in charge of statistics at a central bank – the Directorate General Statistics, in the case of the ECB – should be responsible for the statistics relevant to all functions and tasks of the central bank. Besides monetary policy, which is certainly our main “customer”, the statistical department should also provide services to other areas within the central bank (financial stability and banking supervision, payment systems, international, etc.) and to users outside the central bank (market players, researchers, the general public).
The different functions and tasks of a central bank are clearly related, and the statistical information required for policy actions in these different areas has related or even common sources, requires similar methodological treatments and benefits from an integrated communication network.
This point concerns an important principle: the independence of statistics and statisticians from policy-makers. Independence and fairness in providing data must not only rely on the professionalism of the experts but should also be based on an appropriate organisational framework. Statistical information is so powerful that regardless of the good will of the people involved – which I take for granted – institutional arrangements should make it impossible to speculate on what, how much and when statistical information is disclosed. Standardisation is the specific name that fairness takes when it comes to considering the appropriate treatment that statistical information should receive to combat speculation. Independence does not, of course, mean isolation, lack of communication. Statisticians need a good understanding of and cooperation with other central bank business areas, market players, policy-makers and other users.
The business area in charge of statistics at a central bank should have an appropriate organisational level to fulfil the requirement of independence and to allow it to interact and cooperate on a level playing field with other business areas of the bank and with its counterparties at other institutions with responsibilities in the area of statistics, such as the European Commission (i.e. Eurostat), the Organisation for Economic Co-operation and Development, the International Monetary Fund or other central banks. It was with this idea in mind that the Executive Board of the ECB decided that Statistics should be a directorate general of the ECB and not a directorate or a division as it was in the times of the European Monetary Institute.
Minimising the reporting burden
Let me now turn to what I think is the main trade-off faced by statistics: the trade-off between the quality of statistical information and the reporting burden. As statisticians we are obliged to minimise the reporting burden, subject to the satisfaction of statistical needs. There are many ways to comply with this requirement: by assessing the merits and costs of any new statistical development, by setting clear priorities in the development of statistics, and by improving the coordination between the institutions with responsibilities in the area of statistics, etc. Let me elaborate on these points.
There is a balance to strike between the merits and costs of both new and already available statistics. Official statistics cost taxpayers money. Their production also requires resources from reporting agents. However, the unavailability of required statistics, their late provision, or insufficiently accurate statistics can have significant costs. It is therefore of the utmost importance to establish a procedure according to which the merits and costs for users, producers and reporting agents are weighed up when deciding whether or not to introduce new statistics. It is even more important to review the existing statistics from time to time and to decide whether to discontinue any of them. In general, I have the feeling that some of the statistics we have are not always in line with what our priorities should be.
While there are many national and international users, the most important users must be actively involved in this decision-making process. Users should have to justify their requirements for new statistics, to confirm their requirements for existing ones and to rank both. The production of official statistics which are only very occasionally used must be reconsidered. Users must also be made aware that new economic and financial statistics need several years of lead time before reliable results can be disseminated. Producers must develop and publish a more integrated set of statistics. Not every new policy issue requires new statistics designed to respond to a specific question. Moreover, producers must be given a higher degree of flexibility to respond to new and substantial political priorities, such as the single monetary policy. This also implies a sufficient degree of flexibility in human resource management. In the future, the development, cost-efficient compilation and dissemination of official statistics for a global economy will require not more staff but a large proportion of highly specialised staff.
The ECB has established an internal merit and cost procedure for deciding whether or not to introduce new financial statistics. Similarly, the EU ministers for economic and financial affairs support a re-balancing of the programme for the transmission of data to the European Union, involving users and producers of statistics. I am confident that these procedures will improve the availability of the statistics required and will phase out past priorities.
Need for better coordination
I shall now move to the need for a better coordination of economic statistics in a united Europe. The more we progress in European economic and monetary integration, the more we need to move the focus from national statistics to euro area statistics. From a monetary policy perspective, M3 or credit developments for the whole euro area, for example, are much more important than national M3 or credit figures – although they are not the only relevant information. From a policy perspective, the data from Eurostat’s Harmonised Index of Consumer Prices (HICP) are more relevant than the national measures of inflation and, to a certain extent, the same is true for other statistical data such as the balance of payments and the international investment position of economies.
Of course, I do not deny the relevance of measuring particular national characteristics both for policy and for information purposes. However, it is important to consider is the emphasis placed on European figures compared with national figures and the methodology used to obtain both European and national data. In some cases it would be advisable to obtain national breakdowns of the aggregate European data rather than harmonise and consolidate national data at European level.
In this context, the idea of the European Statistical System and the development of the Principal European Economic Indicators, as well as the First for Europe Principle, are certainly crucial issues.
This leads me to the notion of having greater consistency between European and national data and, therefore, a better coordination between Eurostat, the Eurosystem and the national statistical offices.
Within the Eurosystem, institutional coordination is highly satisfactory, thanks to the outstanding work undertaken by the Statistics Committee.
This is perhaps the point at which I should stress the close cooperation between the Directorate General Statistics of the ECB and Eurostat, which – although their statistical responsibilities extend to all areas of Community policy – give the highest priority to the statistical requirements of Economic and Monetary Union. The division of responsibilities in statistical matters between the ECB and Eurostat works well, avoids any duplication of effort and helps to keep down the cost of producing European statistics. We greatly value the cooperation with Eurostat, without which it would be impossible to satisfy all the statistical needs of the ECB. The signature of the Memorandum of Understanding between Eurostat and the ECB a year ago was a milestone on our path towards closer cooperation.
In spite of many efforts, there are still many statistical areas for which enhanced coordination is needed between national and European statistical institutions in order to provide better information to policy-makers, markets and to the general public. As an example, I could mention the dichotomy between comparable, harmonised HICPs and national, non-harmonised CPIs, which is increasingly hard to justify.
Sooner rather than later, a further shift of emphasis, methodology and therefore resources from national statistics to European statistics will be needed in line with the increasing economic and monetary integration in Europe. It is of the utmost importance that the long-term map of the European economic statistical system is drawn up now in order to ensure that we head in the right direction and avoid a false move, especially since the accession countries are obliged to prepare themselves to adopt euro area statistical standards well in advance.
Alignment with accounting standards
Let me now briefly address another important point: the alignment between accounting standards and statistical standards. The higher the demand for official statistics for a global economy, the more important international statistical standards become. A tighter alignment between the international accounting standards and the international statistical systems is very desirable. Despite some differences, there are clear advantages in ensuring that international statistical and accounting standards are harmonised to the fullest extent possible. Such harmonisation would enable the same source data to be used for several purposes, increasing the reliability of macroeconomic statistics and reducing the reporting burden for corporations. Similar consistency and efficiency gains are possible for the government sector. In this respect the Directorate General Statistics of the ECB is participating in an international initiative to align government accounting practices with international statistical standards. In general, statisticians should be closely involved in discussions on accounting standards in order to avoid unnecessary discrepancies between these standards and statistical requirements.
Universities and researchers
My next topic relates to universities and researchers. Economic and financial statistics, and in particular national accounts, are an integral part of economic studies, just as business accounting is an integral part of business administration studies. It is astonishing that in Europe, at least, the number of graduates and post-graduates with an advanced education in economic and financial statistics is not only insufficient, but is actually decreasing. There is a need to better reflect the growing importance of official statistics for a global economy in university courses. Similarly, researchers may find it attractive to contribute to the further development and application of international statistical standards and their alignment with the international accounting rules, to a better presentation of statistics including the development of quality indicators or to a more efficient compilation of euro area data. The Directorate General Statistics of the ECB would be happy to cooperate closely with a select group of interested researchers at the forefront of research into official statistics for a global economy.
Ladies and gentlemen, I conclude. The development of European economic and financial statistics has been remarkable in the past years. I once called it a “silent revolution”. I would even say that European Economic and Monetary Union itself would not be possible without the developments in the statistical field. However, this silent revolution must now continue at an international level. The ultimate goal would be to reach a similar degree of harmonisation among large economic areas as there is within them.
The ECB’s Directorate General Statistics has made an effort to contribute to the development of European economic and financial statistics. Of course, at the ECB we are fully aware that our statistics are far from being perfect. We certainly do not have perfect statistics, we simply have good statistics, i.e. statistics which enable us to conduct our monetary policy properly and to provide the outside world with an acceptable level of information on monetary, banking and financial developments.
The ECB’s Directorate General Statistics is prepared to move from our “good” statistical system to a “better” one. We have the basis and the means to do so in terms of human and technical resources, support and cooperation. Compared with the past, I have noticed that criticism regarding the quality of Eurosystem statistics has decreased. This could mean that we have made certain improvements, but it could also mean that we are now more prepared to agree on what I said six years ago, namely that we do not need a scalpel to cut a slice of bread – a sharp knife will do. And the statistical knife of the ECB is accurate enough.