G-20 Data Gaps Initiative II: Meeting The Policy Challenge
International Monetary Fund (IMF)
Third Point's Dan Loeb discusses their new positions in a letter to investor reviewed by ValueWalk. Stay tuned for more coverage. Loeb notes some new purchases as follows: Third Point’s investment in Grab is an excellent example of our ability to “lifecycle invest” by being a thought and financial partner from growth capital stages to Read More
affiliation not provided to SSRN
The G-20 Data Gaps Initiative (DGI), which aimed at addressing the information needs that were revealed by the 2007/2008 global financial crisis, concluded its first phase and started a second phase (DGI-2) with the endorsement of G-20 Finance Ministers and Central Bank Governors in September 2015. The DGI-2 recommendations maintain the continuity of DGI-1 but reflecting the evolving policy needs focus more on datasets that support the monitoring of risks in the financial sector and the analysis of the inter-linkages across the economic and financial systems. The paper presents the DGI as an overarching initiative, bringing together various statistical frameworks for a complete picture of the economic and financial system to support the work of policy makers.
G-20 Data Gaps Initiative II: Meeting The Policy Challenge – Introduction
A widely accepted old lesson is that “Good data and good analysis are the lifeblood of effective surveillance and policy responses at both national and international levels1.” Indeed, reliable, comprehensive and timely information is essential to assess the risks and vulnerabilities facing economies as policy making relies on a correct assessment of such risks and vulnerabilities.
In 2007/2008 the problems in the financial systems of a number of advanced economies, including the U.S., spilled across borders to affect the rest of the world. As the financial sector was at the center of the crisis, the G-20 economies supported a number of actions for the reform of the financial sector regulatory framework. Even though a lack of data was not the main reason for the crisis, it would have been possible to detect risk build ups had the right data been available at the right time. To this end, the identification and addressing of information gaps were among the action items for the reform of the financial sector leading to the G-20 Data Gaps Initiative (DGI). As the initiative is about to start its second phase, this paper explains how the DGI is meeting policy needs.
Responding To Policy Needs: The DGI
How the Evolution of Economic Thinking Over Time Affected Statistics
Recognizing the need to strengthen economic and financial data following a crisis is not new. As the economic and financial systems evolve as a consequence of market developments and financial innovation, information needs change. Looking back in history, crisis events have always acted as triggers to question the nature, quality, and availability of data needed for policy making.
The Great Depression of the 1930s is a good example of fundamental advances in economic statistics. As policy makers began to more actively manage the economy and particularly aggregate demand, the intellectual and policy focus came to be concentrated on demand and supply factors in the economy, and on transactions rather than stocks. As a result, the System of National Accounts (SNA), which still remains the overarching framework of macroeconomic statistics, was developed in late 1940s, and the first IMF Balance of Payments Manual was published around the same time.
The capital liberalization trend which started in the 1980s brought new opportunities for investment but also new risks and vulnerabilities, domestically and across border, leading to a growing policy focus on financial stability.2 These developments have necessitated a rethink of macro-prudential and monetary policies3 and also the related statistical frameworks. When the Mexican Crisis occurred in 1994/1995, international capital flows and a lack of relevant information were central. IMF responded with the establishment of two key standards for the dissemination of a core set of economic and financial data: the Special Data Dissemination Standard (SDDS) and the General Data Dissemination System (GDDS). The SDDS was intended for countries with access to international capital markets while the GDDS focused on countries that needed to develop their statistical systems.
In 1997/98 the Asian crisis revealed the need for better information on reserve and reserve related activities as forward sales of foreign currency contracts by the Bank of Thailand were seen as having masked the true pressure on international reserves. As a result, a Reserves Template was developed and the SDDS was strengthened by the addition of requirements on reserves and foreign currency liquidity data.
Due to the global imbalances and the associated discrepancies in income flows at the global level, the first IMF Coordinated Portfolio Investment Survey (CPIS) was launched at end 1997, to improve statistics of holdings of portfolio investment assets in the form of equity, long-term and short-term debt securities. The strengthening of Bank for International Settlements (BIS) International Banking Statistics (IBS) and the increasing adoption by countries of the IMF’s Balance of Payments Manual has been prevalent throughout the past two decades.
See full PDF below.