Transcript Economic forecasts

EUROPEAN COMMISSION
DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS
Economies of the Member States
How Reliable are Statistics for the
Stability and Growth Pact?
European Economy-Economic Papers 273
Notas Estadísticas (Banco de España) 4
João Nogueira Martins
co-author with Luis Gordo (Bank of Spain)
DG ECFIN
European Commission
Motivation
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Inconsistency between
– the rhythm at which statistics are compiled and revised
– the deadlines for political decisions under the SGP
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Statistics are compiled three months after the end of the year…
and revised for four years until they become final
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Policy decisions are taken in the space of a few months…
– Policy decisions are taken on the basis of preliminary data which are
subject to large revisions.
– Revisions often appear too late to be taken into account
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Compare with other administrative uses (e.g. GNI,…)
• It is unrealistic to slow down the SGP-related
procedure
“The fundamental objective of the excessive deficit
procedure is to identify, as quickly as possible, a situation
of excessive deficit or debt and to put an end to it.”
ECOFIN Council Conclusions on statistical governance,
8 November 2005
• It is illusory to accelerate significantly the
production of fiscal statistics.
• Is there a third way?
• To be explicitly aware of potential revisions.
• Countries are not equal in terms of reliability.
• Reliability increases with time.
Quality of statistics:
A multi dimensional concept
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Relevance
Timeliness
Punctuality
Accessibility
Coherence
Completeness
Comparability across time and space
Accuracy
Reliability
It refers to the closeness of the initial estimated value to the subsequently
revised values
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Transparency
Interpretability
Credibility
Cost-efficiency
Available sample for EU-15
• Data reported in spring and autumn each
year since 1994.
• Each reporting covers years t-1 to t-4
• Available series start in 1990
• Latest transmission covers years 2002-2005
(now also 2006)
Available sample
Deficit (-) figures
Mar-94
Sep-94
Mar-95
Sep-95
Mar-96
Sep-96
Mar-97
Sep-97
Mar-98
Sep-98
Mar-99
Sep-99
Mar-00
Sep-00
Mar-01
Sep-01
Mar-02
Sep-02
Mar-03
Sep-03
Mar-04
Sep-04
Mar-05
Sep-05
Mar-06
1990
-8300
-8165
1991
-15900
-15127
-15127
-14995
ES95 starts
1992
-37800
-36601
-36601
-37575
-37575
-37540
1993
-48300
-48664
-49365
-49093
-49093
-49310
-49310
-49660
1994
-46063
-45586
-45382
-45380
-45380
-45532
-45613
-45613
1995
-41742
-40358
-39052
-38854
-38592
-38592
-40032
-40032
1996
-32311
-35971
-34805
-34805
-32970
-32970
-32909
-32909
1997
-14377
-16142
-14823
-15292
-16294
-16294
-16294
-16924
1998
5302
3940
2549
3810
3810
3810
3458
1992
1999
10728
11835
11420
11420
10333
10322
10322
9092
2000
41453
40439
39086
37477
37477
36136
36106
36351
2001
8803
7622
7881
7154
6987
6716
6716
7234
2002
2003
2004
2005
-14058
-15401
-16277
-18074
-18074
-16658
-16817
-34945
-36049
-36977
-36640
-36715
-36893
-36139
-38660
-44727
Revisions
• Numerator (deficit / debt)
• Denominator (GDP)
Our analysis concerns the reliability of the
numerator
• GDP routine revisions rarely have any impact on
the deficit ratio
• A routine revision of 1% in GDP level (a very and large
revision) would reduce the deficit ratio from 3.00% to
2.97%
Calculating average revisions
and standard deviations
Calculating average revisions
and standard deviations
Revisions
• Routine revisions
– New information
– Errors or inconsistencies identified
– Small steps to better comply with the rules
• Structural revisions
– Change in accounting systems (ESA79 to ESA95)
– Large structural errors corrected
– Major changes in accounting systems of Member States
An analysis of reliability is only concerned about routine
revisions
Impact of structural breaks
Are we underestimating reliability?
Deficit and debt
Which are more reliable?
Two approaches
Did data become less reliable
because of ESA95?
Is there a link between deficit
ratio is revisions?
Conclusions (1)
• Policy makers should be made aware that data
are subject to revisions
• One cannot anticipate revisions, but countries are
different…
• …useful to make explicit uncertainty ranges
around the reported data
• Countercheck official deficit data with other
indicators
Conclusions (2)
• FR, DE, UK: most reliable deficit
• (GR), DK, PT, LU, SE, IT: largest dispersion of
revisions
• Large countries report better data?
(but compare IT and IE)
• (GR), IT, PT: largest deficit-increasing revisions
• DK, SE: large revisions, offsetting each other
(in line with other evidence, e.g. statistical discrepancies)
Conclusions (3)
• Debt not necessarily more reliable than deficit
• Debt better than deficit: DE, ES, LU, IT, PT
• Deficit better than debt: BE, FR, AT, FI
• Conjecture: Institutional issues (deficit and debt
compilation; debt decentralisation, consolidation,
financing of public enterprises) explain these
differences
Conclusions (4)
• There is no evidence that shift from ESA79
to ESA95 has led to a deterioration of
reliability
• Complex rules, more experience, better
technology,…
Conclusions (5)
• Size of deficit may have an impact on
revisions
– Is 3% a focal point?
– Biased sample?
– Independence of data compilers?
Conclusions (6)
• Revisions are not an indicator of quality
• Reliability is only one dimension of quality
• Revision are inevitable; even desirable
• Regular analysis of revisions
• Improvement in processes.
Conclusions (7)
• It would be very useful to compare EU
Member States with other OECD countries
• Does the SGP have an impact on the
behaviour of data compilers?
EUROPEAN COMMISSION
DIRECTORATE GENERAL ECONOMIC AND FINANCIAL AFFAIRS
How Reliable are Statistics for the
Stability and Growth Pact?
Comments and questions: WELCOME
Thanks for your attention!!