Monetary Policy and the Quality of Information

Monetary Policy and the Quality of Information The personal computer and the development of websites permit everyone to have rapid access to enormous quantities of data. If it were ever true that policy analysis in developed countries was hindered by availability of timely information, that restriction has now all but disappeared. Data in developed countries become available to all interested parties everywhere almost as soon as they are put out. The organizers of the Bank of Japan's eighth international conference ask us to consider an important question: Has the quality of information increased commensurately? Do we now know substantially more about what is happening in the world or in our own countries. Or, has the increase in information lagged far behind the increase in data which central bankers and financial markets receive? One important issue of this kind is the measurement of productivity and economic growth. In developed countries, especially, and in many developing countries to a lesser degree, service sector output has grown relative to agricultural output. In developing countries, the share of agricultural and manufacturing output in total output and employment peaked some time ago. A significant share of employment is now in government, financial services, health care, education and other services where output is difficult to measure with precision and, often, to measure at all If one cannot measure output reliably, one cannot know what is happening to the price level. Recent, extensive discussion of the several biases affecting the U.S. consumer price index suggests that the bias in the index may be as much as 1-1/2%. A central bank seeking to