...correct possible the earliest possible point in time. The credit indicators C2 and C3, the money supply M2 and household net lending are important financial variables underlying monetary policy decisions. This article presents an analysis of the data quality of these indicators when they are initially published. Figures for household net lending in Norges Bank's financial accounts are also compared with corresponding data calculated in the income account in the national accounts, which have been used as a reference in this discussion.

We conclude that there are relatively small revisions to the C2 and M2 figures, and that the size of the revisions has been gradually reduced over the past few years. For credit from foreign sources, and thereby for C3, revisions of the figures are larger and more frequent. Household net lending is also revised over time, but the initially published figures capture the main features of the final figures relatively well.

Introduction

The quality of initially published data for an indicator is often referred to as its "real time properties". More precisely, the real time properties of an information source refer to its ability to measure the "true" movements in the area covered at the earliest possible point and in the most accurate manner possible. An indicator where it is unlikely that initially published figures will be subsequently revised, where any corrections can be expected to be minor and where the change from one period to the next that is indicated by the figures is seldom reversed as a result of revision, may be said to have good real time properties.

Monetary policy decisions (interest rate setting) are taken on the basis of information concerning developments in a number of economic and financial variables, which is combined to provide a picture of the inflation outlook. The interest rate is set on the basis of the relevant information that is available at the time the decision is taken. A necessary precondition for setting the "right" interest rate is therefore that the real time properties of these variables are good. The credit indicators C2 and C3, the money supply M2 and household financial accounts are important financial variables underlying monetary policy decisions. An analysis of real time properties for these financial indicators is therefore of particular interest from a monetary policy point of view.

In July 2003, the International Monetary Fund (IMF) published Report on the Observance of Standards and Codes, which includes an in-depth data quality assessment of a range of Norwegian statistics compiled by the Ministry of Finance, Norges Bank and Statistics Norway. One of the areas assessed was monetary statistics, including money supply and credit indicator statistics, and the Norwegian statistics achieved a very high score in most data fields. The IMF has a number of criteria that must be met before a statistics producer can be said to follow best international practice. One of these criteria is that revisions of the various statistics are regularly analysed and the results published. A detailed description of what the IMF regards as sound revisions policy is provided in Carson, Khawaja and Morrison (2003, pp. 13-19).

Principles for analysis

In a monetary policy context, figures for both levels and growth rates for credit indicators and the money supply are of interest. However, the assessment of ongoing economic developments is primarily concerned with growth rates. In our study of the real time properties of the credit indicator C2 and money supply M2, we have therefore based our study on the published monthly figures for growth rates in the period January 1997-June 2003, focusing on any differences between initial and "final" figures. In addition, we have studied these differences to discover any systematic deviations. As a measure of the degree of revision, we study the difference in percentage points between initial and final figures for twelve-month growth rates. Under Norges Bank's revisions policy, the time series for credit and money supply variables are routinely revised in the monthly publications. This means that the latest publication contains the figures that in our view are most correct at any given time. To establish more precisely how much of the difference between initial and final growth rates is due to revisions in the source data, however, the final figures (the answer) must be adjusted to accommodate changes in definitions, methods and sources. The idea is that the definitions, methods and sources that were used when the figures were initially published, i.e. in real time, are used for the whole period.

There are no "absolutely final figures" in a series of economic figures. It will always be possible to change the figures at a later stage as a result of revisions in the source data (ordinary revisions) or when series are readjusted after the introduction of new definitions, methods and sources. These reorganisations are made to obtain more correct and consistent historical series. In our experience, most ordinary revisions in C2 and M2 occur in the first three months after initial publication, while there are very few revisions later than this. Our normal practice will therefore be to regard the time series for C2 and M2 published in June 2003 as the "final answer" for a study period up to March 2003.

For credit from foreign sources, and thereby also C3, publication involves a time lag that is just over a month longer than for C2 and M2. At the time of writing, data have only been published for credit from foreign sources and C3 up to end April 2003, and in principle final figures only up to end January 2003. In this article, we have therefore chosen to regard figures up to end December 2002 as final for C2, M2, credit from foreign sources and C3.

Another set of key statistics underlying monetary policy decisions is household financial accounts. These statistics provide a description of households' financial position and summarise this sector's behaviour in financial and credit markets by calculating net...

NOTE: All illustrations and photos have been removed from this article.



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