Nowcasting Annual National Accounts with Quarterly Indicators: An Assessment of Widely Used Benchmarking Methods

Marco Marini

No 2016/071, IMF Working Papers from International Monetary Fund

Abstract: Benchmarking methods can be used to extrapolate (or “nowcast”) low-frequency benchmarks on the basis of available high-frequency indicators. Quarterly national accounts are a typical example, where a number of monthly and quarterly indicators of economic activity are used to calculate preliminary annual estimates of GDP. Using both simulated and real-life national accounts data, this paper aims at assessing the prediction accuracy of three benchmarking methods widely used in the national accounts compilation: the proportional Denton method, the proportional Cholette-Dagum method with first-order autoregressive error, and the regression-based Chow-Lin method. The results show that the Cholette-Dagum method provides the most accurate extrapolations when the indicator and the annual benchmarks move along the same trend. However, the Denton and Chow-Lin methods could prevail in real-life cases when the quarterly indicator temporarily deviates from the target series.

Keywords: WP; Chow-Lin method; BI ratio; absolute error; Cholette-Dagum method; Benchmarking; Extrapolation; Quarterly National Accounts; regression model; Chow-Lin projection; Exports; Imports; Trade in goods (search for similar items in EconPapers)
Pages: 25
Date: 2016-03-18
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Citations: View citations in EconPapers (9)

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