Improving National Statistical Systems

Rebecca M. Blank

U.S. Department of Commerce

Recent news has been bad

• International financial system came close to collapse

• Unemployment has risen sharply

• Output has fallen

All of this was unexpected

GDP Forecasts for 2008Forecasts as of Dec. 2007; year-over-year percent change

Canada France Germany Japan UK US-3

-2

-1

0

1

2

3

-3

-2

-1

0

1

2

3

Average of IMF, OECD, Consensus Actual

GDP Forecasts for 2009Forecasts as of Dec. 2008; year-over-year percent change

Canada* France Germany Japan UK US-6

-5

-4

-3

-2

-1

0

-6

-5

-4

-3

-2

-1

0

Average of IMF, OECD, Consensus Actual

* Based on first three quarters.

Key question

Can we (those of us responsible for economic data) do better?

Could we have provided better data that would have foreshadowed these economic problems or that would have allowed us to better understand the crisis as we were in the midst of it?

Important Note

Data problems did not cause this recession

• The question is not:

“Could we have reported better economic information?

• BUT…

“Could we have done a better job of reporting economic information?”

My Focus

Five U.S. examples:• Financial transactions• Credit information• Household wealth holdings• Industry information• Longitudinal information

Session title: “Are National Statistical Systems Effective?”

Answer to this is an unequivocal ‘yes’

They are good and getting better (and more coordinated across countries) all the time.

But all systems can be improved.

Example 1: Financial Transactions

This recession was generated by near-collapse in the global financial sector, in part due to bad debt, much of it originating in the U.S. housing market.

This financial crisis had many causes• Over-optimistic investors• Under-regulation by government• Lack of due diligence by private sector

But even once we knew there was a problem, it was difficult to use existing data to understand it.

Flow of funds data categories too aggregated. Within the U.S. we couldn’t tell which sectors held the bad debt or how much of it they held. And we couldn’t track it across national boundaries.

Possible Improvements

• More detail on the types of instruments that are held

• More detail on the institutions that are issuing those instruments

• Information on new issues and retirements of debt, as well as net flows

• Better ability to track this information across countries

Example 2: Credit Information

Financial collapse created a credit crisis:

Banks unwilling to make new loans until greater economic stability

Once recovery started, this led to substantial concern about credit constraints.

But it’s been very difficult to tell whether there are credit constraints and who they are affecting.

Need to Separate Demand and Supply for Credit

Little information on this:• In U.S., best data is a regular survey of senior

loan officers, asking for their judgment about credit supply versus credit demand.

• Most of our data just shows aggregate credit flows.

Net Borrowing by HouseholdsBillions of dollars, annual rate

2005 2007 2009-500

0

500

1,000

1,500

-500

0

500

1,000

1,500Mortgages

Consumer credit

Shading indicate recessions; end of recession is assumed to be July.

Potential Improvements

• Credit applications by type of applicant• Approvals by type of applicant

• Alternative sources of credit that are used if formal financial institutions are not lending.

Example 3: Household Wealth

Recession led to large declines in assets and wealth.

Potential effects:• Later retirement and higher labor force

participation among older workers• Less investment in children• Reduced income among those who rely on

pension investments

Timely wealth data is limited

Annual U.S. information comes from the Flow of Funds accounts, showing only aggregate information on wealth holdings among all households

Household wealth survey occurs only once every three years. Last done in 2007.

Household Net WorthTrillions of nominal dollars, year-end

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

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20

40

60

80

0

20

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80Homeowners'equity Deposits Tangible

assetsStocks, bonds, &other financial assets

2009 is third quarterFederal Reserve, Flow of funds

Possible Improvements

• Higher-frequency household-level data on wealth collections

• Distributional information in more aggregate data.

Example 4: Industry-level detail

•The recession has had a big negative effect on output, but some sectors have been hit harder than others.

•Useful data would let us see how different sectors are doing in a timely manner.

Manufacturing OutputIndex 2000 = 100

2000 2001 2002 2003 2004 2005 2006 2007 2008 200985

90

95

100

105

110

85

90

95

100

105

110

Shading represents recession. End of latest recession assumed to be July.

AnnualQuarterly

Potential Improvements

• Quarterly Industry GDP statistics• BEA has this in the current budget request to

Congress.

Example 5: Longitudinal Data

Longitudinal firm-level data can:• Look at firm births and deaths over the economic cycle• Look at which firms contract (or grow) more than others

in a time of economic change

Longitudinal household-level data can:• Show what happens to families when one member

experiences unemployment• Study unemployment spells• Investigate how changes in the housing market change

family behavior over time

Conclusions

Gaps in knowledge occur when data more aggregated. Ways to disaggregate:

• With higher frequency data• With more detailed categories of existing data• With more micro-level information• With more observations on the same unit over

time

Conclusions

Resources are limited, so this is not a plea for “let’s do it all.” Data gaps need to be prioritized.

But let’s use this crisis:• Seek gaps in the data we collect that would have

helped us to better understand the effects of rapid economic change

• Use this moment to argue for the additional resources needed to fill those gaps

Conclusions

• The purpose of the national data is to provide information. It is exactly in times of rapid change that the need for new and additional information is most visible.

• May this be a moment of opportunity to improve statistical systems so they will be even more helpful in the next economic cycle.