Introduction to Ecotrim and DEMETRA+

14/04/2011

Lunch time presentation 14th of April 2011

Dario BUONO and Enrico INFANTEUnit B2 Methodology and Research

Objectives

Inform the production units about the Eurostat IT tools available for Temporal Disaggregation and Seasonal Adjustment

Identify audience for a possible internal courses (including demo session) at ESTAT on the subject

No methodological issues will be addressed No software demo, only screenshots

14/04/2011 Introduction

Contents

Summary information on ECOTRIM (30 mins) Summary information on DEMETRA+ with briefing on

the ESS guidelines on Seasonal Adjustment (30 mins) User support provided by Unit B2 Methodology and

Research (10 mins) Q & A (20 mins)

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Why Ecotrim and DEMETRA+ together?

Target users are the same

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ECOTRIM

TOOL FOR TEMPORAL DISAGGREGATION OF TIME SERIES

Dario BUONO

Topics

Ecotrim in the framework of data production Techniques available in Ecotrim

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Forewords

Ecotrim is a program written for Windows and has been developed by Eurostat

There is a project within Eurostat (UNIT C2) for the development/maintenance of the program

The main aim of this presentation is to demonstrate the potential of the application

User manual is available in EN and FR

http://circa.europa.eu/Public/irc/dsis/ecotrim/library

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Why Eurostat developed Ecotrim?

ESA 95 paragraph 12.04 “The statistical methods used for compiling quarterly accounts

……..can be classified in two major categories: direct procedure and indirect procedure”

... indirect procedures are based on Temporal Disaggregation of the annual accounts data in accordance with mathematical and statistical methods using reference indicators that permit the extrapolation for the current year

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Definitions

Temporal Disaggregation– Process of deriving high frequency data from low

frequency data and, if available, related high frequency information

ECOTRIM – Supplies a set of mathematical and statistical techniques

to carry out Temporal Disaggregation

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Temporal Disaggregation techniques are useful in compiling short-term statistics: Quarterly National Accounts (QNA)

Give a quarterly breakdown of the figures in the annual accounts

Flash estimatesUse the available information in the best possible way including, in the framework of a statistical model, the short-term available information and the low frequency data in a coherent way

Monthly indicators of GDPThe monthly estimates are derived from the available information respecting the coherence with quarterly data

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Other short-term statistics

Short-term industrial statistics Employment Money and banking statistics

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Techniques available in Ecotrim

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Basic principles

Distribution– When annual data are either sums or averages of

quarterly data (e.g., GDP, consumption, indexes and in general all flow variables and all average stock variables)

Interpolation– When annual value equals by definition that of the fourth

(or first) quarter (e.g., population at the end of the year, money stock, and all stock variables)

Extrapolation– When estimates of quarterly data are made when the

relevant annual data are not yet available

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Techniques available in Ecotrim

Temporal Disaggregation of univariate time series by using or not related series and fulfilling temporal aggregation constraints – Mathematical approach and the optimal, in the least

squares sense, approach Temporal Disaggregation of multivariate time series

with respect of both temporal and contemporaneous aggregation constraints

Flash estimates of current year observations by using or not available information on related series

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Temporal and Accounting constraint

Statistical offices are often faced with the estimation of a set of quarterly series linked by some accounting relationship

Temporal Disaggregation methods can also be used in such cases, to give a solution consistent with both temporal and accounting aggregation constraints

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Estimates have to be consistent and coherent

Temporal consistency– Quarterly values have to match annual values (for

example the sum of quarterly values of the GDP must be equal to the annual value)

Accounting coherence– Quarterly components of an account should respect the

accounting constraints (for example, the sum of quarterly values of the GDP expenditure side components should be equal to the corresponding quarterly value of GDP)

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Temporal Disaggregation methods

Univariate Approach– Smoothing methods– Two steps adjustment methods– Time series methods– Regression based methods

• Static models• Dynamic models

Multivariate Approach– Two steps adjustment methods      – Regression based methods

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The classical univariate Temporal Disaggregation

Given the annual observations for an account aggregate and the quarterly values for a related series, the unknown quarterly/monthly values of the aggregate are estimated

Chow and Lin (1971) worked out a least-squares optimal solution on the basis that a linear regression model involving the quarterly aggregate series and the related quarterly series will hold

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Statistics

Rhô R-squared ( next to 1) Durbin-Watson ( about 2 ) Probability of F T-stat Reliability indicators (lower value for the range between

Min and Max)

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Reminders

It must be reminded that the statistics obtained within Ecotrim outputs are based on the annual data

It is advisable to use a unique model all along the series Structural breaks must be taken in consideration It is advisable to have observations covering at least 20

years when disaggregating annual data It is advisable to have observations covering at least 15

years when disaggregating quarterly data

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ECOTRIM

ECOTRIM is a program that supplies a set of mathematical and statistical techniques to carry out Temporal Disaggregation

Structured for Windows 95/98 and Windows NT Visual Basic and C++ User friendly

It can be used according to two different modes:

Interactive mode Batch mode

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Interactive mode

Input session

Univariate methods

• Boot, Feibes and Lismann

• Denton

• AR(1)

• Fernàndez

• Litterman

Multivariate methods

• White noise

• Random walk

• Rossi

• Denton

Output session

Graphs and display

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Batch mode

ECOTRIM performs Temporal Disaggregation of several jobs

starting from a batch command file

Batch mode is very useful when handling many series

Batch command

file

Batch session

• univariate

• multivariate

Output

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Work with ECOTRIM

Input Data

Aggregated Series

Choose the Aggregation Order

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Once you have imported the Aggregated Series, you will able to import the Related Series

Work with ECOTRIM

Use the STATUS bar to check the currently loaded files

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Work with ECOTRIM

Univariate Methods

Univariate Methods

Left click on the series

Choose the Type of Aggregation

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Work with ECOTRIM

Choose the Method…

…and the Related Series

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Work with ECOTRIM

Compute!!!

…and getting results

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Work with ECOTRIM

Display the data

Future of Ecotrim

Updating the Visual Basic/C++ version and refurbish the interface of ECOTRIM with the purpose to match production and users’ requirements

Design of the application as a Building Block, CVD compliant

Make system Windows 7 compatible, compilation as a 64-bit application (former was 16-bit)

Inclusion of more recent methods like: – Univariate Regression based Temporal Disaggregation– Reconciliation by Two-Step procedures (Quenneville &

Rancourt 2005 – Di Fonzo & Marini 2009)

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DEMETRA+

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TOOL FOR SEASONAL ADJUSTMENT

Enrico INFANTE

What is DEMETRA+?

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DEMETRA+ is a tool for Seasonal and Calendar Adjustment developed by National Bank of Belgium for EUROSTAT

Identify more components

Trend-Cycle Component

Outliers

Irregular Component

What are Seasonal and Calendar Adjustment?

SEASONALADJUSTMENT Fluctuations observed during the year (each

month, each quarter) and which appear to repeat themselves on a more or less regular basis from one year to the other

Remove Seasonality

Seasonality:

CALENDARADJUSTMENT

Remove Calendar Effects

Any economic effect which appears to be related to the calendar (one more Sunday in the month can affect production)

Calendar Effects:

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Why DEMETRA+?

User friendly!!!

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ESS Guidelines

It will be Open-Source (java)

Based on X12 ARIMA / Tramo-Seats

Documents about DEMETRA+

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You can download the latest version of DEMETRA+ at the following link:

At the same link you can find:

ESS guidelines on Seasonal Adjustment DEMETRA+ User Manual and other documents Help-Desk e-mail: estat-methodology@ec.europa.eu Information about the next ESTP course (at EUROSTAT, 3-5 May 2011)

and the EUROSTAT Training Course

http://circa.europa.eu/irc/dsis/eurosam/info/data/demetra.htm

How to work with DEMETRA+

presents the available time series

Browser panel

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First overview

How to work with DEMETRA+First overview

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Workspace panel shows information used or generated by the software

How to work with DEMETRA+First overview

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Central empty zone will contain the actual analysis

How to work with DEMETRA+First overview

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TSProperties panel contains the current time series

How to work with DEMETRA+First overview

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Logs panel contains logging information

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• Empty top-left cell

• True dates in the first column

• Title of the series in the first row

• Empty cells for missing values

Browser panel

Excel tab

Add command

Open the excel workbook

How to work with DEMETRA+Importing data from Excel

Displaying the data

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Open one of the containers

DRAG & DROP

How to work with DEMETRA+

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Choose and activate a specification Getting results

Seasonality tests

How to work with DEMETRA+Single Seasonal Adjustment

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What happens after SA?Original, Calendar Adjusted and Seasonally Adjusted series

Original Series

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What happens after SA?Original, Calendar Adjusted and Seasonally Adjusted series

Calendar Adjusted Series

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What happens after SA?Original, Calendar Adjusted and Seasonally Adjusted series

The series has been cleaned!!

Seasonally Adjusted series

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What happens after SA?Growth Rates

Original Series1

1

t

tt X

XG

What happens after SA?Growth Rates

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Calendar Adjusted Series1

1

t

tt X

XG

What happens after SA?Growth Rates

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Seasonally Adjusted series1

1

t

tt X

XG

ESS Guidelines on SA

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Introduced in 2009

Chapters subdivided into specific items describing different steps of the SA process

Items presented in a standard structure providing:1. Description of the issue2. List of options which could be followed to perform the step3. Prioritized list of three alternatives from most recommended one to the

one to avoid (A, B and C)4. Concise list of main references

Added value:1. Conceptual framework and practical implementation steps2. Both for experienced users and beginners

http://epp.eurostat.ec.europa.eu/cache/ITY_OFFPUB/KS-RA-09-006/EN/KS-RA-09-006-EN.PDF

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ESS Guidelines on SA (example 1)Calendar Adjustment

Calendar Effects typically include:

Different number of working days in a specific period Composition of working days Leap year effect Moving holidays (Easter, Ramadan, etc.)

A) Best alternative B) Acceptable C) To be avoided

A) RegARIMA approach, fully checks the significance and plausibility of the effectsB) Regression approach based on the irregular componentC) Proportional Adjustment; other adjustments; no adjustment

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ESS Guidelines on SA (example 2)Validation of Seasonal Adjustment

A) Best alternative B) Acceptable C) To be avoided

A) Use a detailed set of criteriaB) Use only default criteria already defined within the different toolsC) Use only the basic set of criteria or do not validate

SA is a complex data treatment which needs accurate monitoring before the results are acceptable

GraphicalDescriptive Parametric and non- parametric tests

USER SUPPORT PROVIDED BY UNIT B2

Dario BUONO

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EUROSTAT UNIT B2

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Methodology and Research

Provide the EU with a service on the statistical methodologies in order to improve the data quality and reliability for the use of the EU policies

Define, position and co-ordinate all statistical actions in the field of research

Achieve a higher degree of harmonization of the EUROSTAT and ESS practices on SA:

Definition of detailed guidelines on SA       Maintenance and development of reliable tools for SA at ESS level (DEMETRA+) Fostering the exchange of practices among NSIs Organisation of training on SA

 

EUROSTAT UNIT B2

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Methodology and Research

Provide the EU with a service on the statistical methodologies in order to improve the data quality and reliability for the use of the EU policies

Define, position and co-ordinate all statistical actions in the field of research

Consultative role in the ECOTRIM project Partial user support also on methodological aspects by EUROSTAT methodology

helpdesk

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Questions?