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The Effects of Inflation and the Business Cycle on Revisions of Macroeconomic Data

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Abstract

Although national accounts data provide the most comprehensive overview of economic activity, preliminary estimates are subject to much revision before they are regarded as reliable indicators. Oddly enough, the market acts on the preliminary estimates as though they were final and complete. Even though there exists a considerable international literature on the statistical properties of these revisions, little attention has been devoted to the effects of inflation and the business cycle on the size and direction of these early revisions. The aim of this paper is to provide the first known examination of these effects and to identify an optimal policy strategy to ensure the highest quality of data collection. This paper finds the optimal strategy to be a policy of low inflationary economic growth with an inflation target between 0 and 5%.

Suggested Citation

  • Chris Bajada, 2001. "The Effects of Inflation and the Business Cycle on Revisions of Macroeconomic Data," Working Paper Series 110, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
    • Handle: RePEc:uts:wpaper:110
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    File URL: http://www.finance.uts.edu.au/research/wpapers/wp110.pdf
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    References listed on IDEAS

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    1. Robert York & Paul Atkinson, 1997. "The Reliability of Quarterly National Accounts in Seven Major Countries: A User's Perspective," OECD Economics Department Working Papers 171, OECD Publishing.
    2. Hodrick, Robert J & Prescott, Edward C, 1997. "Postwar U.S. Business Cycles: An Empirical Investigation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(1), pages 1-16, February.
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    5. Howrey, E Philip, 1978. "The Use of Preliminary Data in Econometric Forecasting," The Review of Economics and Statistics, MIT Press, vol. 60(2), pages 193-200, May.
    6. Ross D. Milbourne & Gregor W. Smith, 1989. "How Informative Are Preliminary Announcements of the Money Stock in Canada?," Canadian Journal of Economics, Canadian Economics Association, vol. 22(3), pages 595-606, August.
    7. Patterson, Kerry D & Heravi, Saeed M, 1991. "Data Revisions and the Expenditure Components of GDP," Economic Journal, Royal Economic Society, vol. 101(407), pages 887-901, July.
    8. Breusch, T S & Pagan, A R, 1979. "A Simple Test for Heteroscedasticity and Random Coefficient Variation," Econometrica, Econometric Society, vol. 47(5), pages 1287-1294, September.
    9. Robert Brooks & Gabrielle Berman & Sinclair Davidson, 1998. "The nature and extent of revisions to Australian macroeconomic data," Applied Economics Letters, Taylor & Francis Journals, vol. 5(3), pages 169-174.
    10. G. C. Lim, 1985. "GDP Growth Rates Calculated from Quarterly National Accounts: Discrepancies and Revisions," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 18(4), pages 21-27, December.
    11. de Leeuw, Frank, 1990. "The Reliability of U.S. Gross National Product," Journal of Business & Economic Statistics, American Statistical Association, vol. 8(2), pages 191-203, April.
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    Cited by:

    1. Jan Jacobs & Jan-Egbert Sturm, 2005. "Do Ifo Indicators Help Explain Revisions in German Industrial Production?," Contributions to Economics, in: Jan-Egbert Sturm & Timo Wollmershäuser (ed.), Ifo Survey Data in Business Cycle and Monetary Policy Analysis, pages 93-114, Springer.
    2. Kevin Lee & Nilss Olekalns & Kalvinder Shields & Zheng Wang, 2012. "Australian Real-Time Database: An Overview and an Illustration of its Use in Business Cycle Analysis," The Economic Record, The Economic Society of Australia, vol. 88(283), pages 495-516, December.

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    More about this item

    Keywords

    inflation; busines cycles; revisions; national accounts;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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