645 – Recent Developments in Benchmarking and Reconciliation of Large Systems of Time Series Data: Theory and Practice
Restoring Accounting Constraints in the System of U.S. Industry Accounts
Baoline Chen
Bureau of Economic Analysis
This study illustrates a two-step method for restoring temporal and contemporaneous constraints in the U.S annual input-output (IO) accounts between the Quinquennial benchmarks. Step 1 is a univariate benchmarking process to restore temporal constraints in each component series, and step 2 is a multivariate reconciliation process to restore contemporaneous constraints while maintaining the movements preserved via benchmarking. Two alternative procedures for reconciliation are compared. The two-step method is shown to be simple to implement and computational effective. It allows reconciliation to be conducted independent of the benchmarking prediction errors and allows reconciliation of a large system of accounts to be conducted period-by-period, thus greatly reducing the computational requirement.
