Research Spotlight: An Empirical Review of Methods for Temporal Distribution and Interpolation in the National Accounts

THE Bureau of Economic Analysis has adopted a new method for the interpolation of quarterly and monthly estimates in the national accounts. The new method uses a variant of the Denton procedure. National statistical agencies routinely face the task of compiling a large number of quarterly and monthly estimates using relatively complete annual data and less complete quarterly and monthly information from various indicators. Annual data are usually detailed and of high precision, providing the most reliable in­ formation on the overall level and long-term move­ ment in the series. Quarterly or monthly data, while they are less detailed and of lower precision, provide timely and explicit information about the short-term movement in a series. The objective of interpolation in the national eco­ nomic accounts is to use annual data to derive quar­ terly or monthly estimates that preserve as much as possible the short-term movement in the indicator se­ ries while still summing to a benchmark set by the an­ nual data.1 Typically, the annual sums of the quarterly or monthly indicator values are not consistent with the annual values. This means the two series may display inconsistent movements over time. Over the years, the Bureau of Economic Analysis (BEA) has used a variety of techniques for interpola­ tion of the national accounts.2 These techniques yielded varying degrees of success, and analysts at BEA identified some technical challenges in the estimation process: ● Final quarterly or monthly series do not always fol­ low the short-term movement in the indicator series.