Talking to firms aids central banks at ‘turning points’ – BoC paper

Central banks’ contacts among local businesses provide critical information for monetary policy-making, especially at times of great uncertainty, new research finds.

Qualitative field research in monetary policy-making, published by the Bank of Canada, explores what the authors say is a neglected area of economics. Chris D’Souza and Jane Voll say qualitative information gathered from interviews with industry contacts provides an important complement to central banks’ quantitative tools.

D’Souza and Voll adopt a qualitative approach themselves, interviewing central bankers on how they use information gathered from business leaders.

The authors say their findings suggest this field research plays a particularly important role at “turning points”, when the economy has suffered “large recent shocks” and “timely official data are not available”.

“[Central bank] advisers place a high value on being able to reach a relevant, reliable and credible sample of decision-makers across industries and regions in a timely way,” the authors say.

They add that there is some evidence that central banks also use field research to “test theories and assumptions about economic behaviour”.