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On the Extrapolation with the Denton Proportional Benchmarking Method

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  • Marco Marini
  • Tommaso Di Fonzo

Abstract

Statistical offices have often recourse to benchmarking methods for compiling quarterly national accounts (QNA). Benchmarking methods employ quarterly indicator series (i) to distribute annual, more reliable series of national accounts and (ii) to extrapolate the most recent quarters not yet covered by annual benchmarks. The Proportional First Differences (PFD) benchmarking method proposed by Denton (1971) is a widely used solution for distribution, but in extrapolation it may suffer when the movements in the indicator series do not match consistently the movements in the target annual benchmarks. For this reason, an enhanced formula for extrapolation was recommended by the IMF’s Quarterly National Accounts Manual: Concepts, Data Sources, and Compilation (2001). We discuss the rationale behind this technique, and propose a matrix formulation of it. In addition, we present applications of the enhanced formula to artificial and real-life benchmarking examples showing how the extrapolations for the most recent quarters can be improved.

Suggested Citation

  • Marco Marini & Tommaso Di Fonzo, 2012. "On the Extrapolation with the Denton Proportional Benchmarking Method," IMF Working Papers 12/169, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:12/169
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    Cited by:

    1. He, Xi & Lopez, Rigoberto A. & Liu, Yizao, 2015. "Substitution between Online and Offline Advertising: Evidence from the Carbonated Soft Drink Industry," Working Papers 37, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.

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