Workforce Information Forum: Potential Real-World LMI Uses
An overview of potential real-world uses of Local Market Information (LMI) with a focus on workforce data analysis, career awareness, industry insights, and economic impact assessment. Explore how LMI can help assess local areas, develop marketing materials, support new businesses, analyze industry trends, and understand workforce dynamics.
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Annual Central Bank Conference on Development Economics in the Middle East and North Africa The role of research in Central Bank Policymaking: Exchange of Lessons and Best Practices from Mexico Gerardo Esquivel El Colegio de M xico January 31st, 2023
Context I was in academia for 20 years in Mexico (1998-2018). I recently finished my 4 year tenure (2019-2022) as Deputy Governor at the Central Bank of Mexico. There, I got first-hand knowledge of the multiple uses of economic research within the day-to-day operation of the institution. My recommendations at the end are based on my own experience on these two dimensions.
Structure and Organization of Mexicos Central Bank Governing Board (1 Governor and 4 Deputy Governors) Financial System Issues Economic Research Financial Stability Central Bank Operations + other areas (IT, Legal Affairs, Administration, Comptroller and Risk Management, Financial Education and Cultural Promotion, Payments System, Currency Issuance)
Research at Banco de Mxico Banco de M xico has more than 100 researchers spread through different areas. Most of them have a Ph.D. in Economics or Finance from top universities in US or UK. They cover a wide array of research interest and topics: from macro and financial issues to agricultural, labor, and industrial ones. Obviously, most of the researchers are in the Economic Research Department, but there are also researchers in some other departments (specifically in those highlighted in the previous slide). Each of the departments has usually the equivalent to a Research Manager, who is responsible for research activities in their own area. However, most of the Research output disseminated by the Bank in form of Working Papers has to be approved by the Research Department.
The Economic Research Department The Economic Research Department at Banco de M xico has a very good reputation, both internally and externally. The past three Governors of the central bank worked at some point in that Department (Guillermo Ortiz, Agustin Carstens and Alejandro D az de Le n). They ruled the institution for 24 years (since 1997 through 2021). Many other Deputy Governors came from that department as well. The Head of the Research Department is also the Chief Economist of the Bank. This means that this person plays a dual role: as head of economic research, but also as the principal economist for the Monetary Policy Committee.
Dissemination of Research (1) There are several mechanisms of dissemination of the economic research produced at the institution: Working Papers (https://www.banxico.org.mx/DIBM/web/index.html?locale=en) External Publications (https://www.banxico.org.mx/publications-and- press/d/%7B93A7C90E-8F94-7C81-E99D-63A328E617DB%7D.pdf) Note that not all external publications have been previously published as WP. This means that researchers can freely decide the best option for them. Some prefer to disseminate their work as quick as possible, while others prefer to wait to receive positive reviews from journals. Note that WP are refereed by internal (and sometimes external) reviewers.
Dissemination of Research (2) Boxes on Quarterly Reports (https://www.banxico.org.mx/publicaciones-y-prensa/informes- trimestrales/recuadros/recuadros-informe-trimestral-001.html) Full reports (in Spanish): https://www.banxico.org.mx/publicaciones-y-prensa/informes-trimestrales/informes- trimestrales-precios.html Boxes on Financial System Reports (https://www.banxico.org.mx/publicaciones-y- prensa/reportes-sobre-el-sistema-financiero/recuadros/recuadros-reporte-estabilid.html) Full reports (in Spanish): https://www.banxico.org.mx/publicaciones-y-prensa/reportes-sobre-el-sistema- financiero/reportes-sistema-financiero-s.html Boxes on Regional Quarterly Reports (https://www.banxico.org.mx/publicaciones-y- prensa/reportes-sobre-las-economias-regionales/recuadros/recuadros-reportes- regionales001.html) Full reports (in Spanish): https://www.banxico.org.mx/publicaciones-y-prensa/reportes-sobre-las-economias- regionales/reportes-economias-regionales.html
Dissemination through Boxes The fact that the main results of some research output are disseminated through boxes in the different reports is very useful. It is an incentive for researchers to work on issues that are relevant for the bank. Dissemination through boxes is fast and may help them reach a wider audience, since reports get a lot of attention by the media and from analysts. Since boxes are self-contained, they also force researchers to explain their work in a simple way and in a few pages. These boxes are usually proposed by the Research Department, but have to be approved by the Governing Board. This is an additional incentive for researchers, since this is a way to call the attention of the Board on their work. Specific boxes can also be requested or suggested by the Governing Board.
Other research activities There are frequent seminars (weekly or every other week) with invited speakers (usually from abroad) There are also some larger Seminars or Conferences organized with other institutions (https://www.banxico.org.mx/publications-and-press/seminars-and-conferences- econ.html) Summer camp: addressed to graduate students working on their theses. Started back in 1995. Provides short-term support (2-3 months), with a stipend and office. It also helps to identify potential candidates for the job market in the future.
Comments and recommendations (1) It is important to have a relatively large and well diversified group of researchers at a Central Bank. You never know when are you going to need some research on specific topics. For example, in 2019 the minimum wage in Mexico was increased by 100% at the border. There were many concerns about the potential inflationary effect of such measure. Having labor economists at the Banco de M xico, helped us to understand better the potential impact of such increase. As another example, last year Mexico suffer from a drought in certain regions. Having agricultural an environmental economists as part of the staff, allowed us to estimate, in short notice, the potential impact of this situation on the prices of some of the main staple foods in Mexico (maize and beans, for example).
Comments and recommendations (2) A special challenge is how to achieve a good balance between doing work for the bank and doing work based on the researcher s own interests. A good researcher may want to have some free time for his/her own interests. While it is important to allow for this, it should be clear that this is not a purely academic work. Everybody has to contribute, at least on a part- time basis, to pursue topics of interest relevant to the Central Bank. This is partially solved if the head of research is at the same time the Chief Economist. Such an institutional design may align incentives in the right direction. However, there is the risk that this may shift the incentives in the other direction, since it can make researchers to devote too much time to work on specific issues for the bank and abandon other topics that may not seem to be too relevant for the bank, thus limiting original work and reducing innovation or the ability to pursue other interests that may prove to be relevant in the future. In some institutions, this problema is solved by separating the role of Advisory to the Monetary Policy Committee from the role of the Head of Research. I would recommend to do this once you have a very well established Research Department. This could also help to reduce potential conflicts of interest between the two roles.
Comments and recommendations (3) When forming a Research Department, it is wise to have diversity in many dimensions: topics of interest, gender, age, and experience. I strongly recommend to have an overlapping generations approach in the sense that it is always good to have a combination of experienced people with younger cohorts, since the latter may be more familiar with topics and approaches more novel and closer to the knowledge s frontier. This is also important to address issues of future vacancies due to promotions or retirements. I would strongly recommend more interaction between Central Bank researchers and people in academia. They may complement each other very well. People at the Central Bank may know better which topics are relevant or which questions are of practical relevance, and may even have better access to certain sources of information, whereas people in academia may have more time, tools or academic networks to sucessfully conclude specific projects.
Comments and recommendations (4) It takes time to find researchers that are a good fit for the institution. For that reason, it is always a good idea to have an scholarship program for junior staff that is interested in pursuing graduate degrees (Masters or Ph.D.s). In the case of Mexico, junior staff may not only get a loan (that may become a fully funded scholarship) to study abroad, but they algo get a leave of absence that allows them to accumulate benefits or seniority at the institution. When they return, if they stay for a sufficiently long period at the institution (2 years per every year of the first two years of education and 1 year per year thereafter), that debt gets cancelled. Otherwise, they may leave the bank but they have to pay back the loan at market rates. This program allows the Bank to retain talent that has already been identified at an early stage of their professional careers. Since the junior staff is already familiar with the institution, this also helps to reduce searching times for future recruiting of researchers or more senior staff.
