The “AI in Finance” Initiative – The "Artificial Intelligence and Monetary Policy Decisions" project

Written By Guest User

Since the global financial crisis (GFC) of 2008/2009, central banks have been tasked with new responsibilities that include measuring systemic risk, banking regulation and supervision, digital currencies, and climate change. These responsibilities are in part a result of the collection and access to new data sources — introducing central banks to “Big Data”. Artificial Intelligence (AI) and Machine Learning (ML) have gained importance in this process.

Mission

The "Artificial Intelligence and Monetary Policy Decisions" project is part of the “safe Financial Big Data Cluster” (safeFBDC). SafeFBDC, a consortium of initially 15 project partners, is part of the BMWi innovation competition “Artificial Intelligence as a Driver for Economically Relevant Ecosystems”. Over the 2021 to 2023 period, will investigate the use and importance of AI and ML in central banks and monetary policy using well-defined case studies. I am heading this effort at Frankfurt School, where the project is part of my research center “Financial Intermediaries and the Real Economy”, or short “FIRE”.

Objective

The key objective is to improve monetary policy decision making in the Eurozone in two dimensions: (1) improve the data basis for monetary policy decisions; (2) use AI / ML methods to generate new information that is valuable for central banks and monetary policy to investigate questions related to macro analysis and forecasting, supervision of financial indicators and the assessment of financial stability risks. More broadly, these case studies will also help market participants (such as financial and non-financial institutions, regulators, academics) and other “observers” to better understand the reasons and implications of monetary policy decisions. 

Next steps

Together with a great set of co-authors, we have defined several projects, on which we will work over the next months including bank exposure to climate change & stress testing, forecasting of business cycles & inflation or topics on banking supervision. We are building a new infrastructure of IT, server and cloud technology as well as resources and expertise in AI, machine learning with a focus on economics and finance that will drive our research going forward.

If you are interested to know more about our projects or want to collaborate, please reach out.

Guest User
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