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The Ecotrim project has been developed by Eurostat since beginning of 90s Several versions: GAUSS, Fortran, SAS, Windows The version 1.01 beta 3 currently available will be the reference for this presentation Ecotrim for Windows is still a beta version A first version of the manual will be soon available For specific technical details related to methodology, please refer to the literature mentioned in the supporting papers Several users in Europe and outside Europe
Application of advanced temporal disaggregation techniques to economic statistics 3
ESA 95 paragraph 12.04 The statistical methods used for compiling quarterly accounts may differ quite considerably from those used for the annual accounts. They can be classified in two major categories: direct procedure and indirect procedure. ... On the other hand, indirect procedures are based on temporal disaggregation of the annual accounts data in accordance with mathematical and statistical methods using reference indicators that permit the extrapolation for the current year. The choice between the different indirect procedures must above all take into account the minimisation of the forecast error for the current year, in order that the provisional annual estimates correspond as closely as possible to the final figures. The choice between these approaches depends, among other things, on the information available at quarterly level.
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Temporal disaggregation
process of deriving high frequency data from low frequency data and, if available, related high frequency information ECOTRIM supplies a set of mathematical and statistical techniques to carry out temporal disaggregation
Temporal disaggregation techniques are a valid support in compiling short-term statistics (e.g. QNA):
Quarterly National Accounts (QNA) give a quarterly breakdown of the figures in the annual accounts Flash estimates use the available information in the best possible way including, in the framework of a statistical model, the shortterm available information and the low frequency data in a coherent way
Monthly indicators of GDP the monthly estimates are derived from the available information respecting the coherence with quarterly data
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The present Windows version of the program supplies a range of techniques concerning:
temporal disaggregation of univariate time series by using or not related series and fulfilling temporal aggregation constraints (the methods that ECOTRIM offers, follow the mathematical approach and the optimal, in the least squares sense, approach);
temporal disaggregation of multivariate time series with respect of both temporal and contemporaneous aggregation constraints (in this case too ECOTRIM proposes both adjustment and optimal techniques, in the least squares sense);
forecasting of current year observations by using or not available information on related series.
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Temporal disaggregation methods for compiling quarterly accounts are an integral part of the estimation approach.
Their use is more intensive or less intensive according to the main philosophy that characterises the system of quarterly accounts. The use of mathematical and statistical methods do not necessarily imply a lack of basic information since these models can be used also to improve the quality of the quarterly figures.
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Due to differences in definition and coverage, the account indicators do not give the same value as the series to be estimated (such as in the direct approach) Their movement can be used to recover the quarterly dynamics of the unknown aggregate.
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a)
The set of basic information should include statistical variables that are considered as good proxies of the aggregates that have to be estimated All variables that have a high explanatory power with respect to a specific national accounts aggregate but which do not satisfy (a) have to be eliminated from the set of basic information (for example the interests rate for the estimation of GDP);
b)
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c)
The statistical models need not to incorporate any relationships between the aggregates of quarterly accounts that imply economic hypotheses as for example, the relation between consumption and disposable income; The set of basic information should only include variables associated with the economy of the country for which the quarterly accounts are compiled. This means that the information set is closed;
d)
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Selection of indicators
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Basic principles
Distribution
When annual data are either sums or averages of quarterly data (e.g., GDP, consumption, indexes and in general all flow variables and all average stock variables)
Interpolation
When annual value equals by definition that of the fourth (or first) quarter (e.g., population at the end of the year, money stock, and all stock variables)
Extrapolation
When estimates of quarterly data are made when the relevant annual data are not yet available
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time consistency
quarterly values have to match annual values (for example the sum of quarterly values of the GDP must be equal to the annual value):
accounting coherence
quarterly components of an account should respect the accounting constraints (for example, the sum of quarterly values of the GDP expenditure side components should be equal to the corresponding quarterly value of GDP):
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Basic ideas:
sufficiently smoothed path coherence with temporal aggregation constraints these methods can be used when there are serious gaps in basic information (only annual data are available)
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Smoothing methods
They typically assume that the unknown quarterly trend can be conveniently described by a function of time such that the necessary condition of satisfying aggregation constraints and the desirable condition of smoothness are both met.
Generally these techniques estimate the quarterly figures by considering a "window" of annual values and a subset of the time series. Starting from these data, the techniques minimise the discrepancy between known annual values and quarterly estimated data.
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Boot , Feibes e Lisman Minimise the sum of squared first differences between successive disaggregated values (model FD) Minimise the sum of squared second differences (model SD)
suitable for situation with lack of information they ensure interpolation estimates for the quarterly breakdown use of all the information available and give estimation for all the period considered no extrapolation and diagnostics or confidence bands
27 November 2003 OECD, Paris Application of advanced temporal disaggregation techniques to economic statistics 21
The first step in indirectly estimating quarterly accounts series is usually the conversion of quarterly indicators into quarterly series which are not consistent with the annual counterpart. We shall refer to this step as preliminary estimation. At the second step, the preliminary estimates are then processed in order to fit the known annual series, using procedures that we shall refer to as adjustment.
In the multivariate case, the second step includes the fulfilment of the contemporaneous accounting constraints
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Distribution of the annual discrepancy between the annual aggregate and the aggregated preliminary quarterly estimates Fitting annual constraints and altering the quarterly path given by the preliminary estimates to the least extent possible.
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Denton
AFD
PFD
levels
proportional levels
Weighted matrices
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The advantage of this procedure is that they provide nowcasts during the year even if no related indicators are available
more sophisticated statistical smoothing methods they can be used in case of lack of information ARIMA model based techniques
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they merge the steps of preliminary estimation and adjustment one statistically optimal procedure
Chow and Lin (1971) worked out a least-squares optimal solution on the basis that a linear regression model involving the quarterly aggregate series and the related quarterly series will hold
natural and coherent solution to the extrapolation problem. intensively used in National Statistical Institutes, especially in France, in Italy, Portugal, Belgium and Spain.
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Different versions of this technique have been developed according to the different hypotheses related to the structure of the error in the regression model. The stochastic error models usually considered when estimating quarterly accounts series are the following:
Model AR(1) Chow and Lin GLS (min SSR of Barbone and others 1981, max Log Bournay and Laroque, 1979);
Statistics
Reliability indicators (lower value for the range between Min and Max)
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Multivariate models
multivariate dimension contemporaneous accounting constraints are introduced in the estimation step temporal and accounting coherence two approaches:
for
the
No preliminary estimates fulfilling the annual constraint are requested Here is an extension to the multivariate of the univariate approach From the statistical point of view is better to use WN or RW but for the practical aspects Rossi and Denton ensure more coherence in terms of growth rates
27 November 2003 OECD, Paris Application of advanced temporal disaggregation techniques to economic statistics 31
Multivariate adjustment
A reasonable way to eliminate the discrepancy between a contemporaneously aggregated value and the corresponding sum of disaggregated preliminary quarterly estimates, consists in distributing such a discrepancy according to the weight of each single temporally aggregated series with respect to the contemporaneously aggregated one
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Preliminary estimates fulfilling the annual constraint are not necessarily requested
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Use of ECOTRIM
ECOTRIM is a program that supplies a set of mathematical and statistical techniques to carry out temporal disaggregation.
Structured for Windows 95/98 and Windows NT Visual Basic and C++ User friendly
Interactive mode
Input session
Univariate methods
Boot, Feibes and Lismann Denton AR(1) Fernndez Litterman
Multivariate methods
White noise Random walk Rossi Denton
Output session
Batch mode
ECOTRIM performs temporal disaggregation of several jobs starting from a batch command file. Batch mode is very useful when handling many series.
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ECOTRIM: A guided Example The compilation of the euro-area and EU quarterly accounts
Available data
Suppose that you have at your disposal a set of annual data composed by the series of GDP and main expenditure and output components:
Expenditure: households final consumption; government final consumption; gross fixed capital formation; changes in inventories; export; imports. Output: agriculture, hunting, forestry and fish.; industry, including energy; construction; wholesale, retail trade; hotels and rest.; financial, real-estate, renting and business activities; other services activities; FISIM; taxes less subsidies on products.
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Unique GDP
Note that the annual GDP is unique and that the output approach and the expenditure approach are balanced. Annual data cover the period 1991-2002. In addition, Suppose that you have at your disposal a set of quarterly preliminary estimates/indicators to be used for estimating the GDP and the expenditure and output components on a quarterly basis preliminary Quarterly indicators cover the period 1991Q1-2003Q2.
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Objectives
The objective of the exercise to obtain quarterly estimates of GDP and expenditure and output components that:
Fulfil the time consistency requirements: the sum of the four quarters of a year is equal to the corresponding annual figure for each variable; Fulfil the accounting requirements: the sum of the quarterly components is equal to the corresponding quarterly value for GDP both on the expenditure and output side. The available quarterly preliminary estimates/indicators do not satisfy the temporal constraints and the accounting constraint. They give an idea of the quarterly movements of the target variables but do not present the same level as the target variables.
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The Chow and Lin method allows to obtain single estimates of each component that respect the annual constraint for the past years (19912002) and to obtained the estimates for the quarters in the current year (in the example, 2003Q2). The main idea of the approach is that indicator and target variable satisfy a regression model that is valid both for annual and quarterly data, with the exception of the error structure. From the available annual figures the procedure derives the estimates of the parameters of the regression model. These parameters are then applied to the quarterly model to derive the quarterly figures, including the extrapolation for the quarters of the current year.
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Balancing: multivariate Denton procedure. The Denton multivariate method allows obtaining a balanced set of data that respect the accounting constraints for all the considered period and the annual constraints for the past years. This technique requires an input series that already fulfils the time consistency constraint.
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19 91 19 92 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02
Application of advanced temporal disaggregation techniques to economic statistics
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Quarterly indicator
Euro-zone, quarterly indicator
1 600 000 1 550 000 1 500 000 1 450 000 1 400 000 1 350 000 1 300 000 1 250 000 1 200 000
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Final estimate
Annual vs. final
1600000.0 1550000.0 1500000.0 1450000.0 1400000.0 1350000.0 1300000.0 1250000.0 1200000.0 1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 B1GM ANN B1GM FIN
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GDP, statistics
The value of the parameter is: Dependent variables 0.702346 1 --------------------------------------------------------------------------------------------------------------------------------------------------------------Variable Estimate Std Error t-Stat --------------------------------------------------------------------------------------------------------------------------------------------------------------CONSTANT -40845.3 6909.05 -5.91 B1GM_KPM95E_QS 1.04 0 210.52 --------------------------------------------------------------------------------------------------------------------------------------------------------------Valid Cases 12 Degrees of freedom 10 Total SS 1.08E+11 Residual SS 24402792 R-Squared 1 Rbar-Squared 1 STD error of est 1562.14 Log-likehood 110.79 F(2,10) 44320.56 Probability of F 0.25 Akaike Info Criterion 14.86 Heterosk. Condition number ND Durbin-Watson 1.87 Jarque-Bera normality stat. 0.32 Box-Pierce statistic 0.08 Box-Pierce statistic 0.89 Ljung Box Q-statistic 0.1 Ljung Box Q-statistic 1.23
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Batch file
DI="H:\...\Estimates_expenditure\ecotrim"; DO="H:\...\Estimates_expenditure\ecotrim"; FP="eur12_EXP_CON_KPM95E_qs.PRN"; FR="eur12_EXP_CONDET_KPM95E_qs.PRN"; FL="OUTPUT.LOG"; OW="0"; { MET= 4 ; TA= 1 ; ORDER= 4 ; ("eur12_EXP_AGG_KPM95E_AN.PRN":1); ["eur12_EXP_REL_KPM95E_qs.PRN":1]; PARL=-.99; PARH=+.99; }
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GDP(a) =
PC(a) +
GC(a) +
GFCF(a) +
CI(a) +
EXP(a) -
IMP(a)
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Series2
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GVA construction
Preliminary vs. final
79000 78500 78000 77500 77000 76500 76000 75500 75000 74500 74000
1999 2000 2001 2002
PREL
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RES
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