By Barney Greenish, Dennis Jeevarajasingham and Jas Sarai
Revision size, bias and materiality
This section considers in more detail selected examples of series that demonstrate the largest revisions for the series considered in this analysis.
Chart A depicts revisions to the one-month growth rate in M4 lending to OFCs, non seasonally adjusted. Among the non seasonally adjusted data, this series had the highest mean absolute revision (0.42 percentage points), although no evidence of bias was detected for this series.
Revisions are generally larger before February 2012. This reflects the fact that methodological changes to the estimation of this series were implemented for February 2012 data and this affected the estimation of data before this point. These changes consisted of improvements in the estimation of the effects of price movements in OFC securities held by monetary financial institutions (MFIs), specifically to exclude MFIs’ holdings of bonds issued by their own securitisation special purpose vehicles. Therefore, the size and materiality of revisions to this series should be seen as reflecting a one-off change in the measure’s construction; as a result the mean absolute revision for this series has decreased since last year’s analysis for 2010-12 data by 0.24pp to 0.42pp. This change is also the key driver of the revisions to the one-month growth rate of all M4 lending series (which show similar results in terms of materiality).
Chart B shows initial and revised estimates for seasonally adjusted M4 excluding intermediate other financial corporations (IOFCs). In this case, the materiality of revisions can be attributed to a change in the seasonal adjustment methodology implemented in November 2013. This involved a change from temporary adjustment methods to standard methods for the OFC component of M4, which drove the materiality of revisions. Moreover, combined with the change in estimation of MFIs’ holdings of OFC securities, this helps explain the magnitude of the revisions to seasonally adjusted M4 Lending and its OFC component.
For effective interest rates, the series with the largest ratio of mean square revision to variance of the underlying data (one measure of materiality used by the Bank) was time deposits from OFCs (4.68pp, Annex B, Table 6). As discussed in last year’s analysis, revisions to these series were due to a methodological change to exclude the reporting of effective rates for intra-group business.6 This is greater than the 2015 figure (1.96pp) due to smaller variance of the underlying (revised) data; the variance of the revisions is unchanged from last year. Revisions to other rates series were immaterial.
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