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-BOE Haldane Champions "Micro-to-Macro" With New Data Testing Model Projections
By David Robinson
     SHEFFIELD (MNI) - Andrew Haldane, Bank of England Chief Economist and one
of the front-runners to be the next governor, delivered a wide-ranging speech
Tuesday making the case for the development of detailed new micro-data sets that
would allow the BOE to test the projections of its macro-models.
     He said the BOE agents' work on firms' Brexit expectations, which supported
the in-house model's view that output would be hit, was a perfect example of how
to move from micro to macro.
     Following are key points from the speech in Sheffield:
     --Haldane said that the Bank agents' detailed questioning of their business
contacts had helped underpin the BOE's thinking about Brexit scenarios.
     Firms were asked about the consequences of a "no-deal, no-transition"
Brexit and the finding "suggest a marked slowing in output, employment and
investment under this scenario, consistent with the Bank's in-house
macro-economic models. This is micro-to-macro in practice," Haldane said.
     --Brexit contingency planning at firms has included stock-building,
building cash reserves and seeking out alternative suppliers. All of these are
predictable through models, but the BOE agents' work, which is available
real-time to the Monetary Policy Committee, helps get a fix on the extent of
these preparations.
     The MPC in the May Inflation Report and minutes took the view that
stockpiling has provided a one-off boost to GDP in the first quarter, with the
official data due out this week.
     --Haldane's speech read in part like a manifesto for his plans to develop
the BOE. He made the case for boosting its regional activities, a measure that
chimes with the views of the opposition Labour Party, and for finding ways of
getting much greater granularity in the data.
     --The BOE is involved with the drive to enhance official UK economic
statistics through the use of "big data" including everything from rail and port
usage through analysis of text in business and news reports.
     Haldane positioned himself as a firm supporter of the drive to develop a
new generation of data, warning that policy setting without detailed micro-data
was likely to fail.
     "Often, our policy intuition about complex systems is simply wrong. No
model, however micro-founded or data-rich, is proof against those uncertainties.
But one that embodies complex, micro-level dynamics is more likely to do so than
one without them," he said.
     --The speech contained no direct comments on the current monetary policy
conjuncture, with the MPC collectively banking unchanged policy at is May
meeting while endorsing the case for tightening further down the line.
--MNI London Bureau; tel: +44 203-586-2223; email:
[TOPICS: M$B$$$,M$E$$$,MT$$$$,M$$BE$]