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5342.0 - Balance of Payments Statistics, Information Paper on Quality , 1996  
Latest ISSUE Released at 11:30 AM (CANBERRA TIME) 20/02/1996   
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Introduction

3.86. In addition to examining the bias of estimates and the direction and magnitude of revisions to initial estimates, it is useful to consider whether all revisions are worthwhile in the sense that they improve the accuracy of an estimate. An indication of this is given in the graphs included in Appendix 1 where the value of an aggregate, at various intervals after its initial estimate, is related to the latest estimate of that aggregate (the latest estimate is assumed to be the best available approximation of the true value). Table 11 and Table 12 provide complementary information by quantifying the proportion of revisions which reduces the error in monthly (Table 11) and quarterly (Table 12) estimates. Error in this context is measured as the difference between the latest estimate of an aggregate and a preliminary estimate produced one year or less after the initial estimate. As with Table 10, the analysis in Table 11 and Table 12 provides information on counts of revisions rather than monetary values and therefore is limited in that a revision that, say, halves an error has the same weighting as a minor amendment that alters the error only marginally.

11
PROPORTION OF REVISIONS TO MONTHLY ESTIMATES THAT REDUCES ERROR RELATIVE TO LATEST ESTIMATE: JANUARY 1986 TO JUNE 1994 (a)
Within-first-year revisions (b)
One-year revisions (c)
Reduce
error
Increase
error
(d)
Proportion that
reduces error
Reduce
error
Increase error
(d)
Proportion that
reduces error
Aggregate
no.
no.
%
no.
no.
%

Current account
Merchandise exports
373
160
70
90
4
96
Merchandise imports
181
103
64
82
7
92
Balance on merchandise trade
376
180
68
86
10
90
Services credits
337
293
54
59
37
62
Services debits
327
301
52
57
39
59
Income credits
358
324
53
68
29
72
Income debits
452
270
63
78
19
81
Unrequited transfers credits
160
19
89
79
2
98
Unrequited transfers debits
125
73
63
57
25
70
Balance on current account
529
432
55
77
19
80

Capital account
Official sector transactions
244
208
54
59
29
62
General government transactions
242
207
54
60
28
63
Reserve Bank transactions
16
2
89
14
-
100

(a) The latest estimate is that consistent with the January 1995 issue of 5301.0.

(b)
Counts of successive monthly revisions to an estimate, occurring within the first 12 months after the initial estimate, according to whether each revision moves the revised estimate closer to, or further away from, the latest estimate of that aggregate.

(c) Counts of the difference between the initial estimate of an aggregate and the estimate after 12 months classified according to whether the revision moves the revised estimate closer to, or further away, from the latest estimate for that aggregate.

(d)
Includes revisions that ‘overshoot' i.e. they worsen the error but in the opposite direction.

3.87. In the first three columns of the tables, revisions to an estimate occurring within the first year after the original estimate are analysed according to whether they move the estimate closer to or further away from the latest estimate. The third column shows the percentage that reduces error. The last three columns are similar except that they analyse the accumulated net revision to the initial estimate after one year in relation to the latest estimate.

Do monthly revisions reduce error?

3.88. Looking at the monthly data in Table 11, it can be seen that the proportion of revisions that reduces error within the first year (that is moves an estimate closer to its latest value) varies between items. Services debits and income credits were the worst items, with only 52% and 53%, respectively, of revisions moving the estimates closer to their latest values. The corollary to this is that, for each of those items, about half the revisions made during the first year in fact worsened the accuracy of the estimate. General government capital transactions and services credits performed little better, each with only 54% of revisions in the right direction. Examination of Graphs A.5, A.7 and A.8 confirms this picture for income credits and services where it can be seen that the median estimate during the first year both rises and falls.

3.89. Table 11 shows both that there are relatively few revisions to monthly Reserve Bank capital transactions made within the first year, and that these almost always reduce error. It also shows that the cumulative revisions after one year always reduce error, correcting the two within-year revisions that moved the estimate in the wrong direction. This supports the evidence examined earlier which suggested that estimates of this item are very reliable.

3.90. For all items, the majority of cumulative revisions after one year reduced error, although the proportion was low for services credits (62%) and for services debits (59%). This suggests that for those items substantial revisions remained to be applied after the end of the first year. The cumulative effect of revisions to current account items constitute the revisions to the balance on current account which, over the course of the first year of estimation, generally reduced error (80% of one-year revisions reduced error). The pattern for one-year revisions to official sector capital transactions shows 69% of revisions reduced error.

Do quarterly revisions reduce errors?

3.91. Table 12 provides a similar analysis for quarterly statistics. The unrequited transfers debits series has the lowest proportion of revisions within the first year in the right direction (52%). As with monthly statistics, the quarterly services and income items also have low proportions of revisions within the first year that reduce error relative to the latest estimate. In the case of services credits, just over half the revisions within the first year reduce error (54%) and less than half of the oneyear cumulative revisions reduce error (43%). This pattern is evident in the Appendix 1 graph for services credits (Graph A.21) which suggests minor negative revisions follow many of the more significant positive revisions towards the final estimates.

12
: PROPORTION OF REVISIONS TO QUARTERLY ESTIMATES THAT REDUCES ERROR RELATIVE TO LATEST ESTIMATE: MARCH QUARTER 1986 TO JUNE QUARTER 1994 (a)
Within first year revisions (b)
One year revisions (c)
Reduce error
Increase error (d)
Proportion that reduces error
Reduce error
Increase error (d)
Proportion that reduces error
Aggregate
no.
no.
%
no.
no.
%

Current account
Merchandise exports
81
22
79
29
2
94
Merchandise imports
48
19
72
25
3
89
Balance on merchandise trade
79
28
74
30
1
97
Services credits
66
57
54
13
17
43
Services debits
66
55
55
20
11
65
Income credits
77
53
59
22
9
71
Income debits
76
47
62
25
6
81
Unrequited transfers credits
79
46
63
28
3
90
Unrequited transfers debits
43
6
88
25
2
93
Balance on goods and services
32
29
52
18
7
72
Balance on current account
71
58
55
19
12
61

Capital account
Official sector transactions
60
39
61
24
6
80
General government transactions
60
39
61
24
6
80
Foreign investment in Australia
59
30
66
25
4
87
Australian investment abroad
37
25
60
14
11
56
Reserve Bank transactions
9
4
69
4
-
100
Foreign investment in Australia
1
1
50
-
-
-
Australian investment abroad
8
3
73
4
-
100
Non-official sector transactions
74
50
60
19
12
61
Foreign investment in Australia
70
47
60
24
6
80
Australian investment abroad
76
44
63
27
4
87
Balance on capital account
70
51
61
12
13
48

(a) The latest estimate is that consistent with the December quarter 1995 issue of 5302.0

(b) Counts of successive monthly revisions to an estimate, occurring within the first 12 months after the initial estimate, according to whether each revision moves the revised estimate closer to, or further away from, the latest estimate of that aggregate

(c) Counts of the difference between the initial estimate of an aggregate and the estimate after 12 months classified according to whether the revision moves the revised estimate closer to, or further away, from the latest estimate for that aggregate.

(d) Includes revisions that ‘overshoot' i.e. they worsen the error but in the opposite direction.




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