1. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Establishing guidelines for creating long time series for short-term economic statistics Richard McKenzie OECD OECD Short Term Economic Statistics Working Party

2. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Current methods used for linking and backcasting the IIP Given differing lengths of time series & the lack of international guidelines OECD had concern over the consistency of practices across countries Initial analysis based on metadata reported to OECD, IMF and Eurostat is that a large variety of methods are used and terminology is not consistent or well understood Concerns for comparability of data, and many versions of full historical series most likely exist

3. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Differences in published series length Length of time series for Industrial Production Countries Starts before 1980United States, Australia, Turkey, United Kingdom Starts between 1980:1989Canada, Mexico, New Zealand, Norway, Starts between 1990: 1994Korea, Belgium, Finland, France, Germany, Ireland, Italy, Spain, Sweden, Switzerland Starts between 1995: 1999Japan, Austria, Hungary, Netherlands, Poland, Slovak Republic, Greece Starts on or after 2000Czech Republic, Denmark, Luxembourg, Portugal

4. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Brief review of OECD countries linking practices for IIP On basis of available metadata: –16 reported the use of chain linking using a variety of methods (10 annual, 6 five yearly); –5 reported Laspeyres index with base year 2000 weights and time series starting in 2000 (i.e. true Laspeyres) –6 reported Laspeyres index with base year 2000 weights but time series starting before 2000 (i.e. this is not a true Laspeyres index but a simple fixed weight index) –2 reported the use of some other method

5. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Policy and practices for producing long time series Differs a lot between EU and non EU countries (reflected in time series length) Not much reference to user needs, number of references to EU regulation Bank of Italy comment seemed representative of user needs as viewed by OECD: –Importance of reliable long time series for STES …… for a full appraisal of business cycle both in historical perspective and for forecasting purposes

6. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Common themes in comments Backcasting is resource intensive –Especially when classifications change –US Retail trade presentation is a good example of the detailed work involved just to produce data back to 1992 (OECD linked index at aggregate level goes back to 1959) Changes in classification / methodology mean that historical series on old basis no longer relevant / cannot be made comparable Regulations in EU seen as a proxy for user needs?

7. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 User needs Had comments from Bank of Italy stressing the importance for empirical analysis OECD Economics Department demands longest time series as possible for their empirical analysis –Hence the policy of the Statistics Directorate as supplier –If we don’t provide the data, ECO do their own linking ECB have remarked on the important of data from the Main Economic Indicators (compared to New Cronos) because of the longer time series …

8. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 User needs Analytical users need long time series – if the NSO doesn’t provide them they will source them from someone who does or recreate their own –Regardless of methodological issues or costs to NSOs Multiple versions of historical series exist, using different methodologies for backcasting / linking –Lack of knowledge of good practices (e.g. linking methodology: first common period, first common year), lack of knowledge of methodology of different segments of old series –Impact on seasonal adjusted series needs careful examination (change in seasonal factors between versions)

9. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 User needs Is the National Statistical Office (or compiling authority) best placed to create one official version of longest time series possible? –If not them, then who is? Could a distinction be made between backcasting at a detailed level and at an aggregate level? –How to define the aggregate level? –What are the real user needs?

10. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Guidelines on backcasting and linking Nothing comprehensive exists for short-term statistics –IMF manual for quarterly national accounts –PPI manual Eurostat Methodology of short-term business statistics –Most comprehensive source for STES but guidelines for backcasting / linking need more detail and examples (no EU country uses the method recommended in the current guidelines)

11. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Guidelines on backcasting and linking About half countries commented on importance of STESWP establishing recommendations –Many commented on the need for this to be done in conjunction with Eurostat, who have already established some task forces for NACE implementation How to represent the interests / needs of non EU countries –Especially those also planning the introduction of new classification systems in the coming years

12. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Eurostat task force on NACE implementation Producing a handbook on back-casting >Questionnaire >3 methods :Detailed working on micro data: FR, NL, Estat-B5 :Proportion methods: STS(Estat-D3), AT, DE, UK :Extrapolation between bench markings: €ind(Estat-D1), ? >First draft mid September 2006 – TF meeting Sep 21st >Handbook November 2006 on the website Detailed application of handbook to short-term statistics –Proposal to WG in December 2006 following release of first draft of handbook

13. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Possible scope of guidelines Terminology (goal to have harmonised metadata) Index types, advantages and disadvantages and frequency of weighting updates – define preferred, alternative, poor practices Linking methods, advantages and disadvantages, interaction with seasonally adjusted series (issue for SA handbook?) Backcasting in conjunction with classification changes –Possible distinction between detailed and aggregate levels, where goal at aggregate levels is longest time series possible Consistency in practices across set of related indicators and range of short-term economic statistics Assessment of user needs (how to focus this?)

14. OECD Short-Term Economic Statistics Working PartyJune 26-28 2006 Discussion points Scope of proposed guidelines, do they cover the correct issues –Should STESWP get involved in this work, how should it be co-ordinated with Eurostat, who wants to be involved … Is STESWP an appropriate forum for discussing policy on the production of long time series –Can we have any influence on national practices? General discussion on the role of NSOs for compiling long time series given wide range of comments on the paper –Interested to hear Eurostat views and especially the views of user organisations present at this meeting