The central bank will create a new high-frequency monitoring index or the “News Sentiment Index” for economic and financial-related news from online sources, according to Bangko Sentral ng Pilipinas (BSP) Governor Benjamin E. Diokno.
In a recent online press chat, Diokno said the index is part of its Big Data indicator.
The index is still under development and it will be based on online economic and financial news.
“The index aims to gauge consumer and business sentiment against the prevailing economic environment,” said Diokno. “However, the models are still in the early stages of development and have to go through more testing and enhancements to ensure their robustness,” he added.
The BSP has been using Big Data since it was set up by BSP with the help of the University of the Philippines’ School of Economics. Big Data, as defined by the BSP, is characterized by high volume, velocity or variety of data that cannot be processed using conventional tools and software, and that require specific technology and analytical algorithms for its transformation into value for mission critical processes.
“Given the clear advantages of using Big Data for economic assessment and policy formulation, the BSP and experts from the University of the Philippines developed the BSP Big Data roadmap in 2019,” said Diokno.
He said that as part of the roadmap implementation, the BSP “is modernizing its IT infrastructure and enhancing the skills of its human resources to support the implementation and continued use of Big Data in its operations.”
“Moreover, the BSP is working on entering into data-sharing agreements with other government agencies to increase its Big Data sources,” said Diokno.
Since Big Data technology is expected to further enhance the capacity of the BSP in the areas of economic research and analyses, formulation of monetary and financial stability policies, statistical compilation as well as financial regulation and supervision, it will contribute to better informed policy decisions, said Diokno. It will also enable them to better understand the economy and financial system and improves their tracking of economic activities in a more frequent manner. Also, it helps them to generate economic indicators from unstructured and non-traditional data.
Using Big Data, the BSP is assessing existing policies’ applicability and responsiveness to the current needs of the economy, including possible recalibration of policies as necessary such as when it amended its foreign exchange regulatory framework last year.
Citing a 2020 survey by the Irving Fischer Committee, central banks that use Big Data in 2020 rose to 80 percent from 30 percent in 2015.
Diokno said these central banks use big data in areas of economic research, financial stability, monetary policy, statistical compilation, regulatory and supervisory technology, and other related areas.
He also said that BSP is “open to using cutting-edge techniques to extract economic signals from new and reliable data sources.”
“As early as June 2020, the BSP enhanced its monitoring and surveillance of economic and financial developments, including the impact of COVID-19 on the economy, by using high-frequency mobility indicators. We used them to carefully analyze behavioral changes under different lockdown scenarios,” said Diokno.
“These indicators proved to be very useful as they provide up-to-date and critical economic and financial information for policy guidance, at a time when official surveys and traditional data collection activities were hampered by strict quarantine restrictions,” he added. “Incidentally, the changes in these mobility indicators coincide with the movements in the Purchasing Manager’s Index, which showed signs of improvement in October 2021 due to the gradual lifting of the lockdowns. The mobility indicators have proven to be reliable and added value to the accuracy of BSP forecasts,” he also said.