MEETING OF THE WORKING PARTY ON NATIONAL ACCOUNTS Paris, 1114 october 2005

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MEETING OF THE WORKING PARTY ON NATIONAL
ACCOUNTSParis, 11-14 october 2005

• REVISIONS IN QUARTERLY GDP OF OECD COUNTRIES
• Tommaso Di Fonzo
• OECD and University of Padova

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Aims of the paper

• Building, maintaining and using revisions
  databases the QNA-MEI experience
• Some remarks on strategy and tools for revisions
  analysis
• Revisions histories of GDP (real, sa) q-o-q
  growth rates in 18 OECD countries
• Size of revisions to the first published
  estimates (P) on MEI (May 1995 Aug 2005)

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Main results

• Average number of months between the date of
  publication of GDP on MEI and the third month of
  the reference quarter

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Main results

• Revisions to the first published estimates of
  q-o-q GDP growth rates () on MEI. Mean absolute
  revision (1997.2-2002.1)

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Main results

• Revisions to successive estimates of q-o-q GDP
  growth rates (). Mean absolute revision
• (1997.2-2002.1)

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The QNA-MEI revisions dataset

• OECD-ONS workshop on Assessing and improving
  statistical quality. Revision analysis for the
  national accounts, 7-8 October 2004
• The OECD also agreed to explore the possibility
  to expand and maintain the revisions database
  that was set up for purposes discussed in the
  workshop.
• An international dataset and the resulting
  summary measures of revisions should help to put
  countries individual revision analyses into an
  international context.
• First elements presented also at the STESEG
  meeting, 27-28 June 2005

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OECD Main Economic Indicators

• Published in paper format since the early 1960s
• Long time series for key short-term economic
  statistics for most OECD countries
• Quarterly GDP and expenditure components
• Indices of industrial production Composite
  Leading Indicators
• Retail Trade, Consumer and Producer Prices
• Wages, employment and unemployment
• Interest rates, exchange rates, monetary
  aggregates
• Business tendency and consumer opinion surveys
• International trade and international finance
• Balance of payments

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MEI as a revisions database source

• MEI monthly snapshots in principle provide
  historical data on subsequent releases on a wide
  range of key variables
• Provides a coherent set of variables representing
  the information set available at successive
  monthly intervals
• MEI has been published as a CD Rom for many years

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OECD interest in a revisions database

• Analysis Are revisions random (i.e. centred
  around 0)? Are they in general becoming smaller?
• Support internationally coordinated research work
  to improve the quality of early estimation
  methods
• Encourage transparency in the statistical process

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The QNA-MEI revisions dataset

• Initial OECD work (Ahmad, Bournot Koechlin,
  2004) was for G7 countries, period 1996 2000
• Current project (Di Fonzo, STESEG 2005)
• Expand coverage to all OECD countries
• Expand time period covered
• Devise a scheme which can support ongoing
  production of real time database summary
  revision analysis indicators
• Quarterly GDP and its components

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Data availability for GDP (constant prices, sa)
in the QNA-MEI revisions database
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QNA-MEI revisions datasetCaveats for
international comparisons

• P are not necessarily flash estimates
• Timeliness of P differs between countries
• No attempt is made to isolate the different types
  of revisions, (including errors)
• Differences may exist between estimates and
  national estimates
• No investigation into influence of economic cycle
• Period covers SNA93 introduction and other
  changes, fixed base, chain-linking

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Release time of GDP (P) on MEIFurther cautionary
notes

• MEI is commonly published during the first week
  of the month
• Different release timing across countries
• There is no guarantee that the first number
  published in MEI is really the first number ever
  released
• QNA-MEI view on timeliness in the release of
  GDP
• The true timeliness is filtered through the
  publication practices adopted by OECD in the last
  decade

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Release time of GDP on MEI
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Average number of months between the date of
publication of GDP on MEI and the third month of
the reference quarter
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Some notation

• L latest available estimate of GDP published on
  MEI at least 36 months after the first published
  estimate P
• The revision process is evaluated at 1, 2 and 3
  years after the first published estimate
• Y1 estimate published 12 months after P
• Y2 estimate published 24 months after P
• Y3 estimate published 36 months after P
• In Ahmad et al. (2004) the successive revisions
  between P and L are considered as the values
  published on MEI of December for the years t1,
  t2 and t3 (D1, D2 and D3, respectively), where
  t denotes the year to which the reference quarter
  belongs
• In what follows, only Y1, Y2 and Y3 will be
  considered, while in the statistical annex also
  D1, D2 and D3 are analyzed

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Revisions databaseFrom levels
P
Y1
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to QoQ rates of change
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to revisions spreadsheet
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to charts
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to revisions analysis tables
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Revisions analysis Summary statistics

• Mean revision
• Mean absolute revision
• Mean squared revision
• L gt P
• sign(L) sign(P)

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Revisions analysisAssessing the significance of
the mean revisions

• Standard t-test
• Modified t-test using AR(1)-based corrections
  (ONS)
• Modified t-test using HAC (Heteroskedasticity,
  Autocorrelation Consistent) estimate of the
  variance of the mean revision (technical details
  in Di Fonzo, 2005)
• HAC procedure has been implemented in the OECD
  spreadsheet for revisions analysis

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Revisions analysisMean squared revision and its
decomposition

• Summary measure based on a quadratic loss
  function

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Revisions analysisMean squared revision and a
useful decomposition

• UM proportion of MSR due to systematic
  differences between the preliminary and the
  latest estimates
• UR proportion of MSR due to the slope
  coefficient in the regression

• UD disturbance proportion of MSR, part of the
  revision which is not explained by the mean or
  slope error
• Good preliminary estimates will have low values
  of UM and UR and a high value of UD

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Revisions to the first published estimates of
q-o-q GDP growth rates () on MEI. Mean absolute
revision (1997.2-2002.1)
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Revisions to successive estimates of q-o-q GDP
growth rates (). Mean absolute
revision(1997.2-2002.1)
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Comments

• The revisions to the first published estimates
  have been of similar magnitude for most countries
• In Japan and Korea and, to a minor extent,
  Belgium, Denmark, Finland, New Zealand, Norway
  and Portugal, they have tended to be larger
• The size of the revisions over the period 1997.2
  to 2002.1 becomes smalleron average
  Y1-P gt Y2-Y1 gt Y3-Y2for 10 countries
  over 18 (Australia, Belgium, Canada, Denmark,
  Finland, Italy, Korea, Netherlands, Switzerland
  and USA).The opposite is registered for Spain
  and, less markedly, for France

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Is the mean revision to the first published
estimates significant?
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Is the mean revision from successive estimates
significant?
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Comments

• The test conducted to check whether mean
  revisions are statistically different from zero
  gives the following results
• Revisions to the first published estimates of
  GDPevidences confirming this fact emerge for
  Canada, Denmark, France, Italy, Norway and United
  Kingdom.
• Process of revision significant mean revision
  of Y2 to Y1 only for Canada (last common 20
  quarters)the mean revision of Y3 to Y2
  resulted significant for Canada, Japan, New
  Zealand (last 20 quarters), Switzerland and
  United Kingdom (whole sample)Germany is the
  only country showing significant mean revision in
  the Latest vs. Y3 comparison.

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Obstacles to extending the work

• Possible gaps in our electronic sources pre-1995,
  only resort may be paper copies ....
• How far back should the revisions database go?
• Operational problems (e.g. series code changes)
• Methodological issues
• Constancy of national series over time (e.g.
  various methodological changes causing breaks
  revisions)
• OECD procedures (basically, for QNA series,
  seasonal adjustment)
• Data management (produces big databases)

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Elements for discussion

• Presentation of revisions, evaluating the first
  revision registered on MEI, effect of different
  time periods on the summary statistics, stability
  of the results, use of other (simple) descriptive
  measures?
• Possible use of a QNA-MEI revisions database by
  member countries?
• Priority for analyzing other QNA series and how
  to use the results?

• - e.g. as an input to internationally coordinated
  methodological work?
• - To reconsider policies for communicating
  information on revisions to users?

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• THANK YOU!