22 Bholat et al (2015). 16  5  All speeches are available online at www.bankofengland.co.uk/speeches  5  and techniques have been used in recent Bank research to improve our understanding of the functioning of the economy and financial system. Volume th  The statistical bedrock of macro-economic analysis, since at least the middle of the 20 century, has been 23  the National Accounts. The National Accounts have always relied on an eclectic range of data. In the  past, manor accounts on land use, crops and livestock were used to estimate agricultural output. Industrial production was measured by sources as varied as numbers of iron blast furnaces and books listed by the British Library. And services output was estimated based on merchant shipping tonnage. 24  With more data than ever coming on stream, that use of new and eclectic data sources and methods is, if anything, gaining further ground within statistical agencies. In the area of consumer price measurement, MIT’s “Billion Prices Project” uses data from over 1,000 online retailers in around 60 countries to collect 15 million prices on a daily basis. This approach has been found to offer a timelier (and cheaper) reading on 25  consumer prices than traditional surveys. Online price data have also been found to improve short-term  26  forecasts for inflation in certain markets. In the same spirit, the UK Office for National Statistics (ONS) is exploring the use of ‘web scraping’ to complement existing price collection methods.
Dealing with capital inflows Traditionally, the primary concern in emerging market economies about large capital inflows has been that they may be financing an unsustainable current account deficit that could derive in a sudden stop of capital inflows. A sudden stop scenario is particularly costly since it involves a painful restructuring of the economy from non-tradables to tradables and a large correction in the exchange rate with potentially large balance sheet effects, which could result in high volatility and output losses. This view regarding large capital inflows has largely been shaped by current account crises like the ones in Mexico and East Asia in the 1990s. As the evidence I showed, the current account in emerging market economies still displays, on average, a surplus. Therefore, they do not currently present a serious threat, but it is necessary to explore the policy implications of large capital inflows. 1  1  Here I will discuss briefly the main tools from a macro point of view. For further discussion on these policy options, see De Gregorio (2010a). 2  BIS Review 124/2010  In many experiences capital inflows have been exacerbated by policy actions. Most noteworthy are the attempts of authorities to defend an artificially weak currency. The expectations of an appreciation generated by this policy create further incentives for capital inflows. For this reason a flexible exchange rate should be the first line of defense. This is also consistent with providing the monetary authority independence to use monetary policy.