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Estimating time-variation in measurement error from data revisions; an application to forecasting in dynamic models

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  • George Kapetanios
  • Tony Yates

Abstract

Over time, economic statistics are refined. This means that newer data are typically less well measured than old data. Time or vintage-variation in measurement error like this influences how forecasts should be made. Measurement error is obviously not directly observable. This paper shows that modelling the behaviour of the statistics agency generates an estimate of this time-variation. This provides an alternative to assuming that the final releases of variables are true. The paper applies the method to UK aggregate expenditure data, and demonstrates the gains in forecasting from exploiting these model-based estimates of measurement error.

Suggested Citation

  • George Kapetanios & Tony Yates, 2004. "Estimating time-variation in measurement error from data revisions; an application to forecasting in dynamic models," Bank of England working papers 238, Bank of England.
    • Handle: RePEc:boe:boeewp:238
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    File URL: http://www.bankofengland.co.uk/research/Documents/workingpapers/2004/WP238.pdf
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    References listed on IDEAS

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    Cited by:

    1. Alastair Cunningham & Jana Eklund & Chris Jeffery & George Kapetanios & Vincent Labhard, 2009. "A State Space Approach to Extracting the Signal From Uncertain Data," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(2), pages 173-180, March.
    2. Alastair Cunningham & Jana Eklund & Chris Jeffery & George Kapetanios & Vincent Labhard, 2009. "A State Space Approach to Extracting the Signal From Uncertain Data," Journal of Business & Economic Statistics, Taylor & Francis Journals, vol. 30(2), pages 173-180, March.
    3. Paul Downward & Andrew Mearman, 2008. "Decision-making at the Bank of England: a critical appraisal," Oxford Economic Papers, Oxford University Press, vol. 60(3), pages 385-409, July.
    4. Lavan Mahadeva & Alex Muscatelli, 2005. "National Accounts Revisions and Output Gap Estimates in a Model of Monetary Policy with Data Uncertainty," Discussion Papers 14, Monetary Policy Committee Unit, Bank of England.
    5. Alastair Cunningham & Chris Jeffery & George Kapetanios & Vincent Labhard, 2007. "A State Space Approach To The Policymaker's Data Uncertainty Problem," Money Macro and Finance (MMF) Research Group Conference 2006 168, Money Macro and Finance Research Group.
    6. Paul Downward & Andrew Mearman, 2005. "Methodological Triangulation at the Bank of England:An Investigation," Working Papers 0505, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    7. Cecilia Frale & Valentina Raponi, 2011. "Revisions in ocial data and forecasting," Working Papers LuissLab 1194, Dipartimento di Economia e Finanza, LUISS Guido Carli.

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    More about this item

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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