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Improving Interval Estimation of Quarterly National Accounts in the Philippines

This study proposes alternative methods for interval estimation of the Quarterly National Accounts in the Philippines, aiming to address the issue of revisions in GDP growth estimates. The empirical results suggest that an Ordinary Least Squares Estimation without bootstrap yields the most favorable interval estimates. However, further research is needed to generate better intervals considering sector-specific revisions and exploring the Bayesian approach.

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Improving Interval Estimation of Quarterly National Accounts in the Philippines

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  1. IMPROVING THE INTERVAL ESTIMATION OF THE QUARTERLY NATIONAL ACCOUNTS OF THE PHILIPPINES By John Lourenze S. Poquiz1, Stephanie Rose R. Moscoso1, and Ellen Grace A. Guiam2 1Macroeconomic Accounts Service, Philippine Statistics Authority 2UnionBank of the Philippines Presented by Ellen Grace A. Guiam (UnionBank of the Philippines)

  2. Outline • The Problem and its Background • Revisions in the National Accounts • Interval Estimation of the National Accounts • Empirical Results • Conclusions • Recommendations

  3. The Problem and its Background • The Gross Domestic Product (GDP) is revised four times after its preliminary release. • Considering the certainty that preliminary estimate of GDP growth would change as new data becomes available, it is imperative for the statistical agency to release interval estimates of the GDP growth. • At present, the PSA publishes interval estimates of the GDP growth rate using the methodology proposed by Virola and Parcon (1996). • This study aims to suggest alternative methods of interval estimation for the Quarterly National Accounts.

  4. Revisions in the National Accounts Table 1: Summary statistics of GDP at constant prices from 1999 to 2013

  5. Revisions in the National Accounts Table 2: Summary statistics of GDP growth revisions from 1999 to 2013

  6. Revisions in the National Accounts Figure 1: Scatter diagram of GDP growth rates between the initial estimate against the revised

  7. Interval Estimation of the National Accounts • Historical Method • Ordinary Least Squares Estimation Bootstrap Procedure

  8. Empirical Results Table 3: Comparison of Spread and Ability of the Intervals to Capture the Final GDP Growth

  9. Conclusions • Out of the four methodologies attempted in this study, the intervals generated from the OLS (without bootstrap) yielded the most favorable result. • The spread of 1.6 percentage points is still large. One of the reasons why the spread of the intervals tends to be large is because of the magnitude of revisions. • For all methodologies, the intervals are only a function of the revisions. If the revisions are large, the intervals to be generated would likely be wide. The wide intervals could be indicative that revisions are large.

  10. Recommendations • Given the results, we believe that it is critical to have a more thorough study on the revisions of the national accounts in order to generate better intervals for the GDP growth. • The magnitude of the revisions could differ for every sector of the GDP. It may be necessary to generate different intervals for each of these sectors. Future research in the field could also consider the Bayesian approach to interval estimation, as it tends to generate superior results from limited time series data.

  11. Thank You

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