The Bank for International Settlements (BIS) is launching Project Insight to explore how to better monitor developments in global value chains (GVCs) by combining structured and unstructured granular data and applying big data analytics tools.
The segmentation of global production and trade in the form of GVCs has long been accepted as common practice. However, there are significant data and analytical gaps that hinder policymakers' ability to monitor trends and shifts in GVCs.
Recent shocks to global supply chains laid bare just how little we know about firm-level GVC relationships and how they can spread shocks and affect economic growth, inflation and financial markets. For example, the Covid-19 pandemic placed significant stress on GVCs, precipitating supply chain bottlenecks, altering established supplier relationships and contributing to a surge in inflation across much of the globe. The disruptions spread through complex firm interconnections that are not evident in the aggregate data. Also, recent efforts to "reshore", "near-shore" and "friend-shore" production networks can potentially drive a significant restructuring of supply chains.
It is important for central banks and policymakers to understand GVC dependencies and monitor their shifts and trends, as GVCs are intricately linked to central banks' core objectives of price stability and economic growth. Indeed, the topic of supply chains increasingly features in the considerations, discussions, speeches and published materials of central banks and regulatory authorities around the world.
Against this backdrop, Project Insight seeks to build a timely and comprehensive GVC monitor that can support central banks, policymakers and international organisations in monitoring critical developments in GVCs and assessing the associated economic and financial impacts. Insight will work with the private sector to explore combining rich amounts of structured and unstructured granular data of relevance to GVCs. It will also explore the application of big data analytics tools such as artificial intelligence, machine learning and network analysis to extract meaningful insights for the public sector.
Project Insight is a collaboration between the BIS Innovation Hub's Hong Kong Centre, the BIS Monetary and Economic Department, the Hong Kong Monetary Authority, the International Monetary Fund, the World Trade Organization, the Asian Development Bank, the Organisation for Economic Co-operation and Development, the United Nations and DIW Berlin (German Institute for Economic Research).