Quarterly Bulletin
Economic Statistics Articles

Extracting a better signal from uncertain data (730k)
(By Alastair Cunningham and Christopher Jeffery of the Bank's Conjunctural Assessment and Projections Division.) Most macroeconomic data are uncertain - they are estimates rather than perfect measures. One symptom of that uncertainty is the propensity of statistical agencies to revise their estimates in light of new information or methodological advances. While revisions should move estimates closer to the 'truth', the potential for early estimates to be revised poses challenges for forecasting and economic analysis. Over the past few years, Bank staff have undertaken a range of research into how best to deal with the ensuing uncertainty. The results of that research have been used for some time as part of the toolkit available to staff when briefing the Monetary Policy Committee. This article describes some further developments in that research effort aimed at refining the staff's toolkit.

Proposals to modify the measurement of broad money in the United Kingdom: a user consultation (521k)
(By Stephen Burgess and Norbert Janssen of the Bank's Monetary and Financial Statistics Division.) The concept of money traditionally relates to goods or assets that are generally accepted as media of exchange. In practice, there is considerable disagreement about how money should be measured. To ensure its measure of broad money remains relevant, the Bank regularly reviews the theoretical and practical basis of its definition of M4, as part of its long-term research programme. This article explains the Bank's analysis undertaken over the past year, in which a key issue has been to question whether the present boundary between the money-creating and the money-holding sectors is still appropriate. The Bank proposes to move that boundary in a few places, to address some changes that have taken place in the global financial system in recent years. In most other respects, the Bank's measure of broad money will be unaffected, as there are no compelling reasons for further modifications. The Bank welcomes readers' views on the proposals discussed in this article, by the end of December.

Measuring interest accruals on tradable debt securities in economic and financial statistics
(82k)
(by Chris Wright of the Bank's Monetary and Financial Statistics Division). This article reports a current methodological debate about the way in which interest flows are recorded in a variety of macroeconomic statistics. When new international statistical standards were published in 1993, one of the major changes to the recommended presentation of the System of National Accounts and the Balance of Payments was the adoption of accruals recording for income and expenditure. However, as countries have begun to implement these standards, questions have been raised about their exact interpretation in respect of interest flows associated with tradable debt.

In essence, the issue is how to measure the property income from a fixed-term debt security on which the cash flows are fixed but whose market value is free to vary. Two methodologies in particular are under scrutiny: the first views the accruing interest income as fixed over the life of the security, once the issue price and conditions of future cash flows are known; the second takes the view that there is no a priori way of determining what proportion of the future payments stream represents interest and what proportion principal. Under this view the income stream is fixed only for so long as market conditions are constant after issue. Following any change in conditions that results in a change in the value of the security, a new future income profile is established.

Choosing between these alternatives raises some profound conceptual and practical questions. At one level, these concern the accounting rules required for coherence within the National Accounts. At a second level, the issues concern the practical implications of a change in terms of both data collection and interpretation. National accountants and government finance statisticians in the United Kingdom, and most other countries, adopted the first of the two methodologies when implementing the new standards. Moving to the alternative methodology would have consequences for recorded interest flows within the accounts, in turn leading to different profiles for national and sectoral saving and deficits, including the general government surplus/deficit.

This article reviews these alternatives and concludes in favour of the second approach. It is a summary of a longer discussion document, commissioned by the International Monetary Fund (IMF). The full paper looks separately at the principles of accruals accounting; the conditions for coherence within the National and Sector Accounts; measurement problems; and the implications for users, particularly in the area of government debt management. The present shorter text aims to give sufficient flavour of the central arguments to indicate why this is an important issue for users of macroeconomic statistics, and the reasons for recommending a change of practice.