Fixed Base Year vs. Chain Linking in National Accounts: Experience of Sub-Saharan African Countries

By Robert Dippelsman, Venkat Josyula, Eric Métreau

July 8, 2016

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Format: Chicago

Robert Dippelsman, Venkat Josyula, and Eric Métreau. Fixed Base Year vs. Chain Linking in National Accounts: Experience of Sub-Saharan African Countries, (USA: International Monetary Fund, 2016) accessed November 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

There are two approaches for producing volume estimates of GDP, fixed base year and annual chaining. While most advanced economies have adopted the chain-linked approach in the past twenty years, some African countries are hesitant to do so, in part because of the computation and data requirements, and resource constraints. What difference does this make for the accuracy of the growth rates? From detailed data provided by three Sub-Saharan African countries we run simulations and conclude that the differences of GDP growth using the two approaches are small and do not behave in the consistent way found in advanced countries. We also show that weak deflation techniques and overly aggregated classifications used to derive volume measures can lead to large distortions. We conclude that improved deflation techniques and detailed classification should be addressed before adopting chain linking.

Subject: Deflation, Economic sectors, GDP measurement, Manufacturing, National accounts, Price indexes, Prices

Keywords: Base year, Chain, Chain linking, CPI, Deflation, Deflation technique, Expenditure data, Fixed base year, GDP measurement, Manufacturing, Price indexes, Reference year, Sub-Saharan Africa, Sub-Saharan African, System of National Accounts, Volume growth, Volume measure, Volume measures, WP

Publication Details

Pages:

22
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/133
Stock No:

WPIEA2016133
ISBN:

9781475569339
ISSN:

1018-5941

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