Nowcasting Annual Benchmarks from Quarterly Data: An Assessment of Benchmarking Methods

• Activity Number: 169
• Type: Topic Contributed
• Date/Time: Monday, August 10, 2015 : 10:30 AM to 12:20 PM
• Sponsor: Business and Economic Statistics Section
• Author(s): Marco Marini*
• Companies: IMF
• Keywords: Benchmarking ; Extrapolation ; Quarterly National Accounts

Abstract

Benchmarking methods can be used to extrapolate (or "nowcast") the next low-frequency benchmark on the basis of available high-frequency indicators. Quarterly national accounts are a typical example, where a number of quarterly (or monthly) indicators of economic activity are used to calculate a preliminary annual estimate of GDP. This paper aims at assessing the extrapolation accuracy of three popular benchmarking methods used in the national accounts compilation: the Denton proportional method, the Cholette-Dagum proportional method with first-order autoregressive error, and the Chow-Lin temporal disaggregation model. Using both simulated and real-life national accounts data, the results show that the performance of the three methods varies according to the type of discrepancies between the annual benchmarks and the quarterly indicators.