Leveraging Technology in Central Banking: Macroeconomic Forecasting & Managing Volatility

While there is no doubt about the centrality of a central bank in any economic set up, its role and functions have undergone some changes over last few decades. With total control on the issuance and supply of money and flow of credit in any economy, a central bank can influence the macroeconomic variables of a country and is supposed to use this power to the benefit of the nation and its residents. The task is arduous and the tools are limited. Against this highly simplified backdrop, the application of the latest technology like Big Data, IoT, Artificial Intelligence and Block chain in approaching the central banking objectives is seen to strengthen the hands of the monetary authority in its endeavor to orchestrate the macroeconomic variables and choreograph the movements in general price level and exchange rate in a way as to avoid volatility and ensure a reasonable degree of predictability in the degree and direction of movements of the major economic parameters. The objective of the paper is to explore and describe the potential that the latest technology and empirical tools hold in assisting the central bank in achieving its objectives. It also lays the foundation and opens up the gates for further exploratory research that can be built upon it.