Using machine learning and big data to analyse the business cycle

This article reviews how policy institutions – international organisations and central banks – use big data and machine learning methods to analyse the business cycle. It provides different examples to show how big data and machine learning methods are particularly suitable for capturing large shocks and non-linearities in real time. The coronavirus crisis is a case in point, where big data have provided invaluable timely signals on the state of the economy, thus helping to track and assess economic activity, domestic demand and labour market developments in real time. Finally, the article discusses the main challenges faced by central banks when using non-standard data and methods and areas of further application to the work of central banks. JEL Classification: C53, C55, E32