How can big data enhance the timeliness of official statistics?: The case of the U.S. consumer price index

The daily consumer price index (CPI) produced by the Billion Prices Project (BPP CPI) offers a glimpse of the direction taken by consumer price inflation in real time. This is in contrast to the official U.S. CPI, which is compiled monthly and released with an average of a three-week delay following the end of the reference month. A recent body of research contended that the movements of online prices are representative of those of offline retail prices, making the BPP CPI a natural candidate for accurately improving the timeliness of the official CPI. We assess the predictive content of the BPP CPI using a variety of MIDAS models that accommodate data sampled at different frequencies. These models generate estimates that remain robust to the variety of time periods considered and, by the standard of the existing literature, contribute to a significant upgrade in the forecast accuracy of official consumer price inflation figures. The paper then sketches the broad implications of BPP CPI for the consumer price statistics maintained by national statistics offices and discusses how the proposed improvement in the timeliness of the official CPI fits in this perspective.     

ACCOUNTING FOR EXHAUSTIBLE RESOURCES IN THE CANADIAN SYSTEM OF NATIONAL ACCOUNTS: FLOWS, STOCKS AND PRODUCTIVITY MEASURES

The paper shows that the Canadian System of National Accounts includes exhaustible resources but treats them as if they were produced goods. Thus, the claim that conventional accounts ignore the contribution of exhaustible natural resources is partly true. To fully account for exhaustible resources, we present an alternative national accounting framework that incorporates natural resource flows and stocks. The framework modifies the measure of the net domestic product by a factor that differs from the Hartwick-Solow-Weitzman rule and leads to different estimates of GDP, national wealth, and productivity growth. An application to the Canadian oil and gas industry shows order-of-magnitude effects.     

The role of industrial classification in the micro-macro integration: The case of the banking business in the 1997 North American industrial classification system

Although economic classification is not part of the Ruggles's prodigious contributions to the System of National Accounts, it is certainly meant to help achieve the integration and linking of macrodata with microdata. Unfortunately, economic classification is a component of the statistical infrastructure that often remains unquestioned by the existing industrial organization literature. This paper fills this gap using the banking business under the 1997 North American Industry Classification System (NAICS) as an example. More specifically, the paper ascertains the extent to which NAICS succeeds at combining the various activities performed by Canadian banks into homogeneous industries. Assuming that producing units within the same industry should display more similar cost structure than those in less similar industries, we find that NAICS—at least for the banking sector—is successful at identifying and grouping producing units into homogeneous economic activities. This result is particularly helpful for empirical research that relies on microdata to draw inferences on the structures, conduct and economic performance of the banking sector as whole.     

Testing the Option Value Theory of Irreversible Investment

This article statistically tests the option theory of irreversible investment. Using contingent claims valuation, we derive the value of options to invest in capacity, where the projects are endogenous to the economic circumstances prevailing at the investment date. We then test whether decisions made by Canadian copper mines are compatible with the trigger price implied by the theory. Our model explains investment size and timing satisfactorily from a statistical and an economic point of view; simulations with a mean-reverting process suggest that the results do not depend crucially on the assumption that price follows a geometric Brownian motion.     

Sectoral sources of sub-Saharan Africa’s convergence

From 1970 to 2010, sub-Saharan African’s (SSA) labour productivity hovered at around 6% of the US level. This lacklustre performance, which remained stubbornly low despite the SSA’s growth spurt that started in the mid-1990s, masks a great deal of variations across sectors and countries. Using a structural decomposition, we examine, for a representative sample of SSA countries, the sectoral sources that hold back their convergence to the US frontier. Our results suggest the presence of strong – and possibly long-lasting – headwinds that have wiped out the favourable effects of substantial, yet circumstantial, tailwinds. Headwinds, quantified by the unfavourable within- and reallocation-effects, are indicative of significant capital-deepening and technology gaps, both of which are extremely hard to bridge. The tailwinds, represented by favourable between-effects, result from the convergence of the SSA labour force to sectors where some US sectors have seen a slowdown of their productivity relative to that of the whole economy – a development unrelated to the fundamentals underlying the SSA economy. Although few exceptions emerged out of this general pattern, these results are indicative of a bleak outlook for the SSA economic performance at least in the medium run.     

THE EUROPE–U.S. PRODUCTIVITY GAP IN A REAR‐VIEW MIRROR: WILL MEASUREMENT DIFFERENCES IN THE SERVICES SECTOR OUTPUT PLEASE RISE?

The deterioration in 1995 of Europe's productivity performance relative to the U.S. coincided with the ‘renaissance’ of the U.S. statistical system, which can be regarded, by now, as the frontier in official statistics. This paper raises the natural question whether the European statistical system was ‘left at the station’ while its U.S. counterpart ‘departed’, making it possible for measurement differences to become the primary suspect for the existing productivity gap. My retrospective review of the development path in the services sector productivity statistics suggests that Europe lags significantly behind the U.S. in the services producer price index program, both in terms of scope and timing of its implementation. Accordingly, the role of these measurement differences in the post‐1995 Europe–U.S. productivity story cannot reasonably be ruled out. The paper concludes with a ‘structured guess’ that provides a circumstantial evidence on the benefits generated by the upgrades in the U.S. services sector statistics. The results show that these enhancements led to two kinds of benefits during the post‐1995 period – a considerable reduction in the contribution of industries that traditionally dampened the aggregate productivity trend combined with a larger contribution of those that generally lifted it. This contrasts markedly with Europe where the contribution of these two sources remained unchanged in the meantime.