IMF Working Papers

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

Author/Editor:

Marco Marini

Publication Date:

March 18, 2016

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Summary:

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.

Series:

Working Paper No. 2016/071

Subject:

Exports Imports International trade National accounts Trade in goods