1. European Central Bank – DG Statistics*
Seasonal adjustment of chain-linked volume measures in Quarterly National Accounts: Findings of a European Task Force
Martin Eiglsperger
European Central Bank – DG Statistics*
The 2008 World Congress on National Accounts and Economic Performance Measures for Nations Washington D.C., May 2008
* The views expressed in this presentation are those of the author
and do not necessarily reflect the views of the European Central Bank.

2. 1
Background
Annual chain-linking of Quarterly National Accounts (QNA) volume measures
By almost all statistical offices in the EU since 2005
Implementation not fully harmonised across EU countries
2007: European Task Force, chaired by Eurostat and the ECB; 19 EU countries participated → impact of chain-linking techniques and relevance for seasonal adjustment
Detailed investigations by Robert Kirchner, Ingo Kuhnert, Sven Öhlén and Marcus Scheiblecker

3. Chain-linking techniques (1)2
Chain-linking techniques (1)
Three approaches to the annual chain-linking of Laspeyres volume indices in average prices of the previous year:
Annual overlap technique: links refer to the volumes of the previous year at average prices of the year
One-quarter overlap technique: links refer to the volumes of the fourth quarter in the previous year at average prices of the year
Over-the-year technique: links refer to the volumes of the same quarter in the previous year at average prices of the year

4. Chain-linking techniques (2)3
Chain-linking techniques (2)
Use of chain-linking techniques in EU countries:
Annual overlap technique: most EU countries
One-quarter overlap technique: Austria and the United Kingdom
Over-the-year technique: Used in the Netherlands and Sweden; change-over to the annual overlap technique planned / (partly) realised

5. 4
Effect on growth rates
Annual overlap technique: Year-on-year growth rates do not reflect pure volume changes, quarter-on-quarter rates do within the same calendar year
One-quarter overlap technique: Quarter-on-quarter growth rates reflect pure volume changes
Over-the-year technique: Year-on-year growth rates reflect pure volume changes

6. Effect on time consistency5
Effect on time consistency
Annual overlap technique: Annually chain-linked QNA and chain-linked Annual National Accounts (ANA) are consistent over time
One-quarter overlap technique: Annually chain-linked QNA and chain-linked ANA are not consistent over time → benchmarking
Over-the-year technique: Annually chain-linked QNA and chain-linked ANA are not consistent over time, but deviations tend to be very small

7. Aggregation and disaggregation6
Aggregation and disaggregation
Aggregation/disaggregation of unchained data
Annual overlap technique: Nominal values of the previous year as weights → existing data
One-quarter overlap technique: Volumes of the fourth quarter of the previous year at average prices of the year as weights → additionally required
Over-the-year technique: Volumes of the respective quarter of the previous year at average prices of the year as weights → additionally required

8. Time series properties (1)7
Time series properties (1)
Chain-linked volume measures: Trend and weak substitution effect in the source data
Source: Kuhnert, I. (2007), internal presentation to the Task Force

9. Time series properties (2)8
Time series properties (2)
Chain-linked volume measures: Trend and strong substitution effect in the source data
Source: Kuhnert, I. (2007), internal presentation to the Task Force

10. Seasonally adjusted series9
Seasonally adjusted series
Time consistency:
not present in seasonally adjusted data
Task Force recommends benchmarking
Aggregation and disaggregation: One-quarter-overlap and over-the-year technique require additional weights data, annual overlap-technique does not (after benchmarking)
Additivity of s.a. data via “indirect” adjustment, i.e. aggregation of unchained s.a. data? → consistency vs. quality of seasonal adjusted data might be an issue

11. Order of procedures Chain-linking, seasonal adjustment, benchmarking10
Order of procedures
Chain-linking, seasonal adjustment, benchmarking
Non-linearity of procedures: Order matters!
Benchmarking as the last step in order to fulfil user requirements for time consistency
Benchmarking can have a significant impact on the seasonal pattern (ARIMA-models, X-12 output)
Seasonal adjustment after chain-linking
Research by the Office for National Statistics (United Kingdom): “Drift” of one-quarter-overlap approach could be reduced by conducting s.a. first

12. 11
Summary (1)
Over-the-year technique can have a substantial impact on the seasonal pattern → not recommended by the Task Force
Annual overlap technique: Time-consistent data + no additional data requirements for aggregation!
One-quarter-overlap technique: smooth transition, but does not produce time-consistent series → benchmarking is recommended
Seasonally adjusted chain-linked series: benchmarking is recommended in order to produce time-consistent series

13. 12
Summary (2)
Consistency in aggregation of seasonally adjusted data: “Indirect” adjustment by aggregating unchained data → consistency vs. quality of seasonal adjusted data might be an issue
One-quarter-overlap approach:
Seasonal adjustment before chain-linking?
Benchmarking!