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Backcasting the future

Backcasting the future. Gary Brown Office for National Statistics, UK. Overview. Reclassification Estimation Backcasting Results. Context. ONS is changing standard industrial classification from a 2003 version (NACE rev. 1.1) to a 2007 version (NACE rev. 2)

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Backcasting the future

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  1. Backcasting the future Gary Brown Office for National Statistics, UK

  2. Overview • Reclassification • Estimation • Backcasting • Results

  3. Context • ONS is changing standard industrial classification from a 2003 version (NACE rev. 1.1) to a 2007 version (NACE rev. 2) • User needs vary – estimates required on both SIC03 and SIC07 bases both prior to and post 2010 survey design change • Both backcasting and forecasting needed

  4. Estimation • Prior to 2010, SIC07 series can only be derived from existing SIC03 • Two estimation methods used in ONS • Conversion matrix estimates based on weight wij from dual coding businesses to SIC03i and SIC07j • Domain estimates from calibrating businesses sampled on SIC03 strata to SIC07 register totals • Domain estimates more accurate than conversion, and closer to post-2010 vintage

  5. Discontinuity • Potential discontinuity from Dec 08 to Jan 09

  6. Discontinuity • Potential discontinuity from Dec 08 to Jan 09 domain conversion Jan09 Dec09

  7. Discontinuity • Potential discontinuity from Dec 08 to Jan 09 • Many discontinuities due to reclassification of large businesses in January update of ONS business register – these changes were backcast • Some discontinuities due to errors – domain estimates rely on robustness of dual coding • Remaining discontinuities need backcasting

  8. Backcasting methods • Moving averages method (MA) • Factor for backseries first of following rules to hold: (1) constant MA (2) modal MA (3) model MA closest to link period (4) average MA • Level Shift (LS) method uses time series analysis to test for and estimate level shift from moving from conversion series in Dec08 to domain series in Jan09 • Factor for backseries is LS adjustment

  9. Results • The results all come from the Monthly Business Survey – 6 month overlap period, so 3x1 MA used • Discontinuities were assessed for four different questions (Turnover, Export Turnover, New Orders, Export New Orders) and from 12 to 69 SIC07 codes for each • Industries are illustrated for two questions

  10. Results – Turnover of Motor Vehicles

  11. Results – Turnover of Motor Vehicles

  12. Results – Turnover of Motor Vehicles • MA link • (1.007,1.007,1.008,1.009): rule (2) chooses 1.007 • (1.01,1.01,1.01,1.01): rule (1) chooses 1.01 • LS link • LS at January 2009 not significant • LS adjustment would be 0.873 • Comment • LS confounds recession with estimation change

  13. Results – Export New Orders in Textiles

  14. Results – Export New Orders in Textiles

  15. Results – Export New Orders in Textiles • MA link • (1.060,1.062,1.083,1.095): rule (4) chooses 1.075 • (1.06,1.06,1.08,1.10): rule (2) chooses 1.06 • LS link • LS at January 2009 not significant • LS adjustment would be 0.918 • Comment • MA spuriously accurate at 3 dp, but better than LS

  16. Conclusions and future • The results show • MA method more robust: but care needed with the degree of accuracy used in calculating the links (rule (4) chosen 13% at 2dp and 70% at 3dp) • LS method suffers from throwing away all the conversion estimates during overlap • For the future • SIC03 forecast by reverse conversion/domain • the discontinuity from Dec 09 to Jan 10 is being handled through commentary accompanying ONS releases – the decision whether to backcast is deferred until more data are available

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