Stephen Poloz runs the Bank of Canada, the nation’s central bank. As a central banker, Poloz scrutinizes economic models to predict movements in the global financial system.
But Poloz doesn’t just rely on data that he gleans from his computer screen. In addition to scanning models, graphs and economic indicators, he also gathers evidence by interviewing actual people.
Poloz and his team spend some of their time traveling through Canada chatting with a range of citizens, especially business executives, about economic issues. For example, his researchers went to Calgary to meet with managers at energy companies to ask them about infrastructure investments they were considering. Poloz’s staff also visited Toronto to pick the brains of retail executives on the competitive pressures they faced when pricing their merchandise.
Discussing such topics with people face-to-face helps Poloz draw more accurate conclusions about the economic challenges that impact real businesses.
He then seeks to reconcile his team’s in-the-trenches findings with economic modeling data.
In describing his unconventional approach, Poloz provides an analogy. He compares central bankers to “the sailors of another era who were driven far off course by a nasty storm. When things calmed, they found themselves in the Southern Hemisphere. Suddenly the navigational chart that they relied on—the night sky—was completely different.”
His comment reflects the confusion that many central bankers around the world confronted in 2008 during the financial crisis. The turmoil led many of them to realize that leaning too heavily on computerized models was foolhardy.
— Adapted from “Canada Central Banker’s Unusual Approach,’” Jon Hilsenrath and Elena Cherney, www.wsj.com.