Big data in monetary policy analysis—a critical assessment

Abstract

Over the last years the use of big data became increasingly relevant also for macroeconomic topics and specifically the conduct and analysis of monetary policy. The aim of this paper is to provide a survey of these applications and the relevant methods. The rationale for doing so is twofold. First, there is no straightforward definition of “big data”. Since macroeconomics and monetary policy analysis has a long tradition in quite sophisticated and data-intensive empirical applications the nature of the innovation big data is indeed bringing to the field is reflected upon. Second, concerning statistical/empirical methods the analysis of big data necessitates the use of different tools relative to traditional empirical macroeconomics which are in some cases a complement to more traditional methods. Hence big data in monetary policy is not just the application of well-established methods to larger data sets.