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Fixed Base Year vs. Chain Linking in National Accounts: Experience of Sub-Saharan African Countries

Author

Listed:
  • Mr. Robert Dippelsman
  • Venkat Josyula
  • Eric Métreau

Abstract

There are two approaches for producing volume estimates of GDP, fixed base year and annual chaining. While most advanced economies have adopted the chain-linked approach in the past twenty years, some African countries are hesitant to do so, in part because of the computation and data requirements, and resource constraints. What difference does this make for the accuracy of the growth rates? From detailed data provided by three Sub-Saharan African countries we run simulations and conclude that the differences of GDP growth using the two approaches are small and do not behave in the consistent way found in advanced countries. We also show that weak deflation techniques and overly aggregated classifications used to derive volume measures can lead to large distortions. We conclude that improved deflation techniques and detailed classification should be addressed before adopting chain linking.

Suggested Citation

  • Mr. Robert Dippelsman & Venkat Josyula & Eric Métreau, 2016. "Fixed Base Year vs. Chain Linking in National Accounts: Experience of Sub-Saharan African Countries," IMF Working Papers 2016/133, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2016/133
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    References listed on IDEAS

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    1. Charles Steindel, 1995. "Chain-weighting: the new approach to measuring GDP," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 1(Dec).
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    Cited by:

    1. Francien Berry & Massimiliano Iommi & Mr. Michael Stanger & Louis Venter, 2018. "The Status of GDP Compilation Practices in 189 Economies and the Relevance for Policy Analysis," IMF Working Papers 2018/037, International Monetary Fund.
    2. Aaron George Grech & Noel Rapa, 2019. "A reassessment of external demand’s contribution to Malta’s economic growth," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 8(1), pages 1-13, December.

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