Who should be discussing the comparability of statistics?
There was an excellent speech by Alan Bollard discussing why New Zealand’s GDP is difficult to compare to other countries – and if we measured things the same way we would not look as poor at all. This is a great point, and is well made.
However, I’m not dealing with that point here – I’m dealing with the fact that I think its an inappropriate topic to be covered by the governor of the Reserve Bank given our current institutional framework. Here is my thinking:
- When it comes to the idea of comparing international statistics, first responsibility for making sure things are transparent goes to Statistics New Zealand – the group that focuses on these issues, and creating the statistics we use.
- If there is a feeling they cannot cover the role of educator for some reason (lack of resources, institutional impediment), it falls on Treasury to make sure the point is clear – or to do research that makes the point. Treasury is the primary adviser to government descriptive economic issues and should be covering it.
- Should Treasury and Statistics New Zealand both ignore the issue – then we have to hope for a strong academic/researcher community to look at these issues and make a point of it when they come up in public.
- The Reserve Bank involves a team of top economists focusing independently on important issues of monetary policy and financial stability. Their success depends heavily on communications, and making the scope of what they can do and control clear.
In this environment, having the head of the Reserve Bank discuss the issue both undermines the roles of Statistics New Zealand and Treasury as researchers and educators, and in turn confuses the public about what the Reserve Bank does and what it can control.
The Bank needs to ensure it is constantly drilling home the message of what it can and can’t do – not making arbitrary statements on the structure of the economy, or issues related directly related to fiscal or government policy (like closing the gap with Australia).
I’m not going to make any friends saying this, but although the speech was excellent putting these types of issues in public through the central bank, rather than having a strong Treasury department performing this role, is a recipe for institutional failure. You want to know why the public gets confused about what monetary policy is – because of things like this.
Note: I am not saying that this is the fault of the Bank or the governor per see – someone needs to be saying this message, and we need to ask why Treasury or Statistics NZ aren’t resourced to do it. For me, that is a significant issue.
Even though I agree with the gist of what you’re saying, this is not why most people find monetary policy confusing!
Hehe, I see where you are coming from.
I was trying to infer that if the time was spent discussing monetary policy and how it works instead of non-monetary issues, society would be better informed and policy/outcomes in that space would be improved.
I dream of a world where people get bored of listening to me talk about monetary policy, not because it sounds monotonous, but because the framework and justification for things are just so obvious.
Probably, but I think Keeping up with the Kardashians still has wider readership than all the world’s monetary policy writing combined =/
For sure – but I wouldn’t say that is the issue per see. I’m not sure hedonistic pleasures are the correct counterfactual for discussion on monetary policy for most people (not all).
If you just sit at home not doing monetary economics, your views on monetary economics will be determined by whatever small amount of information you get. When that information is the head of the Bank discussing structural issues in the New Zealand economy, and the income gap with Australia, you are bound to get a different idea than when the head is discussing actual monetary policy.
And it is for that reason that I believe it has a much stronger, persistent, impact than we often give it credit for.
I’d also note that by discussing monetary policy lots, and clearly, they force a lot of other commentators who look at the issue all the time to get a clearer idea of the framework – a factor that in turn makes it more likely that people hear about the true “trade-offs” the RBNZ is battling with.
Here’s another explantion – he’s just bored and trying to find stuff to do. Poor Alan – the main thing that NZers look to RBNZ for is the setting of the OCR – he has already pre-committed to not change the OCR for the next several meetings – he needs to find something to do…
He may also be aware that overseas ratings agencies, currency traders and fund managers etc (i.e. a lot of the people who have the greatest impact on money flows in and out of NZ) probably read very little on New Zealand and releases from the RBNZ governor may be one of the few things they read. Surely providing a realistic view of the New Zealand economy’s performance relative to Australia is important in that regard?
It is a very good point that he could be educating foreign traders about New Zealand.
I’d say that its strange we have a situation where it is the RBNZ head doing that – and not someone in policy or in the statistics department. For me, this is an important institutional issue – the central bank gets its independence in order to clarify its mandate, and that is what it should focus everything on as a result.