Impact of calendar effects

1. UNECE Workshop on Seasonal Adjustment 20 – 23 February 2012, Ankara, Turkey Impact of calendar effects Anu Peltola Economic Statistics Section, UNECE

2. Overview • Meaning of calendar effects • Causes of calendar effects • Types of calendar effects • Reason for calendar corrections • Problematic issues

3. Calendar Effects = any economic effect related to the calendar • Seasonal component includes two types of effects: seasonal & calendar related • Removed before seasonal adjustment • Include: • number of different days in a month • composition of working and non-working days • moving holidays • leap year effect • Alter the level of activity measured

4. Causes of Calendar Effects • The rhythms of human activity: • 24-hour rotation of days • Weekly rest • Holiday periods • Traditional behaviour related to the calendar • These social habits and rhythms also cause seasonality • Changes in habits between winter and summer are not part of calendar effects, but seasonal effects

5. Calendar Correction • Removes non-seasonal calendar effects from the data, if statistical evidence and economic explanation • Four possibilities: • Trading days (working/non-working, 6 regressors)) • National and moving holidays ((provided by the user)) • Leap-year • Easter • Demetra+ pre-tests the presence of theseeffects, if tests are significant: • Using calendar adjustment / calendar correction improves significantly results!

6. Working Day Effect • Difference between week/weekend days • Volume of production may be smaller on Saturdays and Sundays than on weekdays • Level of activity is higher if the month contains more weekdays • Working day effect • Sometimes, the number of weekdays doesn’t affect the level of activity at all, for example, when the factories operate in shifts every day.

7. Trading Day Effect = Difference between all days of the week • Means that the level of the measured variable varies depending on the day of the week • Different days have a different weight/ effect on the data

8. Moving Holidays = The impact on the series of holidays whose exact timing shifts from year to year • Examples of moving holidays: • Easter • Chinese New Year - where the exact date is determined by the cycles of the moon • Ramadan • Need to be added by the user to Demetra+

9. Moving Holidays • April 2008: +3 working days vs. April 2007 • Easter was not in April in 2008 • Without any adjustment IPI grew about 8 per cent (April 2008 from April 2007) • If you working day adjust, growth was 5 per cent

10. National Holidays • Influence the number of working days • Country specific historical list of public holidays and compensation holidays need to be kept • Improve estimates of the calendar component • Compensation holiday = additional holidays sometimes announced if a national holiday falls into the weekend • Need to be added by the user to Demetra+

11. Leap Year • The leap year adds one day in every four years • The day can be either a working day or it may fall into the weekend • Demetra+ tests for the significance of the leap year effect

12. Trading/Working Day Adjustment • Aims at a series independent of the composition of days in a month • In the working day adjusted data everyday is equal • Improves quality of seasonal adjustment! • Easier to observe the underlying economic development • Should be applied only if these effects are present • Compile, maintain and add national holidays for better estimates!

13. Problematic Calendar Issues • Changes in regular national holidays • Abolished holidays – new holidays • Regional differences in holiday calendars in a country • Complex set of moving holidays • Excessive use of compensation holidays • Changing durations of holidays • Combining national holidays with pre-defined calendar corrections • “Bridge effect” means that complete the holiday with the days which are decided by goverment (bonus days)