international guidelines on trade indices training on calculation of external trade indices for...

Training on calculation of External trade indices for statisticians in ESCWA countries- 14-16 December 2009 - Beirut 1/37

International Guidelines on trade indices

International Guidelines on Trade Indices

Slides based on a presentation by

Ronald Jansen

Trade Statistics Branch

United Nations Statistics Division



International Guidelineson External Trade Indices

International Merchandise Trade Statistics: Concepts and Definitions (Rev 2, 1998)

Guidelines on Price and Quantity Statistics (1977) Strategies for the Measurement of External Trade

Indices (1981) National Practices in compilation of External Trade

indices (2005) XMPI Manual (IMF and others, 2008)



International Guidelineson External Trade Indices

• Main uses of external trade indices:• Government economic policy (monetary policy)• Analysis of country competitiveness (on domestic and

external markets)• Terms of Trade • Measuring inflation risk, forecasting future price trends

(including CPI, PPI)• Exchange rate analysis (pass through into import prices)• Compilation of National Accounts (Deflators)• Specific market analysis



International Recommendation (IMTS, Rev.2,1998)

Paragraph 160 :

Index numbers. Many users need more information than trade values by country or by commodity, and require information on prices and volumes as well. Two kinds of indices may be produced to reflect prices: unit value indices based primarily on customs documents and price indices based on survey data. The relative strengths and weaknesses of those two approaches to index number compilation are described in the United Nations publication Strategies for Price and Quantity Measurement in External Trade. Although price indices are generally preferred, in practice countries may not have the resources available to compile that information.



International Recommendation (IMTS, Rev.2)

Index numbers.

It is recommended that all countries produce and publish volume (quantum) indices and either unit value or price indices for their total imports and exports on a monthly, quarterly and annual basis.

Countries are also encouraged to calculate and publish such indices for the detailed commodity groups at least quarterly



Guidelines on Price and Quantity Statistics

• Deals with all macro-economic indicators

• Published in 1977…

• Provides general guidelines on:

1. Uses of price and quantity statistics

2. Design of price and quantity indices

3. Choice of units of observation

4. Types of index formulae

5. Choice of index formulae and weighting methods



Guidelines on Price and Quantity Statistics

• Export/Import price indices are elements in a broader structure of price indexes described in the System of National Accounts …

• Export/Import priced indices must be adapted to the needs of National Accounts (product classification,…)

• National Accounts aggregates (GDP) may be sensitive to XMPI


International Guidelines on trade indicesSummarized structure of price and quantity indices in the frame of SNA

SUPPLY OF OUTPUT :PRODUCER'S PRICES

Commodities Activities

Gross output Gross outputIntermediate Consumption

Value added Net sector output

Agriculture PPI…

Mining

Manufacturing

Electricity, Gas, water

Construction

Distributive trades

Transport and communications

Finance

Services

USES OF OUTPUT:PURCHASER'S PRICES

Consumption by Households CPI…

Consumption by Government

Consumption by Non-profit institutions

Gross Fixed capital formation

Change in stocks

Exports XPI (SITC)

Imports MPI (SITC)



Guidelines on Price and Quantity StatisticsChoice of units of observation

The choice of units of observation determines what is counted as a change in price and what is counted as a change in quantity.

For instance, if differences are taken into account between cars with small, cars with large engines, sports cars and pick-up trucks, then those differences are reflected as differences in quantity. The price differences are taken between the same type of car.

If cars are not differentiated, then all changes in structure or in quality will be seen as an increase or decrease in the price of a car.



Guidelines on Price and Quantity StatisticsTypes of index formulae

1. Laspeyres

2. Paasche

3. Fisher

4. Relation Price and Quantum Indexes



∑PitQi0

∑Pi0Qi0

i=1

n

n

i=1

PL=

Guidelines on Price and Quantity StatisticsTypes of index formulae



Guidelines on Price and Quantity StatisticsChoice of index formulae and weighting methods



Strategies for the Measurement of External Trade Indices

1. Source of data

2. Limitations of unit values and survey prices

3. Major problems of pricing

4. Types of index-number formulae

5. Strategies for compiling index numbers



Strategies for the Measurement of External Trade IndicesSource of data (part I)

1. Customs records- Data useful for indices:

a) Commodity codesb) Trading partner codesc) Customs procedure codesd) Quantity unit codese) Mode of Transportation codef) Identification of importer/exporter

- Almost exhaustive coverage, but :- Greater scrutiny generally applied on imports- Commodity classification often more detailed on imports- Access to detailed transactions not always possible



Strategies for the Measurement of External Trade IndicesSource of data (part I)

2. Export and Import – price surveysa) List of importers/exporters : Business associations, business

Registers, Customsb) Sampling Design:

Draw sample from the list of enterprisesDiscuss with each firm the particular items to be selected for pricing

c) Survey taking



Strategies for the Measurement of External Trade IndicesLimitations of unit values and survey prices (part II)

1. Main problem of unit values: heterogeneity

a) Different products in same item

Other problem : quantity measurement (definition, customs controls)




1. Main problem of unit values: heterogeneity

Example of refrigerators (page 15)

Period q p v q p v q p v q p v

Initial 5 1 5 3 2 6 2 3 6 10 1,7 17Current 2 2 4 3 4 12 5 6 30 10 4,6 46

small Medium Large All sizes

Overstatement of price increase by unit value of 36%




2. Main problems of price surveys:

a) Cost

b) Choice of product varieties to be priced

c) If items too specific, they may change quickly



Strategies for the Measurement of External Trade IndicesMajor problems of pricing (valuation) – (Part III)

1. Quality Changes

2. Unique Goods

3. Seasonal Goods

4. Transfer pricing

5. Prices CIF or FOB



Strategies for the Measurement of External Trade IndicesSome tentative solutions – (Part V)

1. Measuring Unit value bias- through examination of distribution of unit values within each category of the classification, consultation with enterprises,…

2. Refining Unit values-use of all possible data available in Customs records: partner country, size of transaction, mode of transport, identity of importer/exporter, tariff classification

3. Combining sources of data : “The overall measurement of price changes in external trade could be improved by combining the Customs-based data with information drawn from a variety

of sources” (direct surveys, domestic producer prices,…)



Strategies for the Measurement of External Trade IndicesStrategies for compiling index numbers (part VI)

1. Limited Budgeta) Unit Value Indexes – detailed Customs data – selection

of “stable” items - data screening

2. Average Budgeta) Unit Value Indexes – sophisticated data editing

b) Commodity specialists – possible use of a variety of sources to fill the gaps

3. Large Budgeta) sophisticated Unit Values and Price surveys (dual or

combined strategy)

b) Commodity specialists



National Practices in compilation of External Trade indices

Questionnaire (8 questions, conducted in 1999-2002, 77 respondents)

a) Index number series producedb) Source of Informationc) Index calculation methodsd) Limitations of indicese) Release datesf) Revision Policyg) Disseminationh) Compiling agency



National Practices in compilation of External Trade indicesResults: Index number series produced

Unit Value index only - 75%Price Index only - 17%Both UV and Price - 8%

SITC - 45%HS - 19%BEC - 16%ISIC - 20%

Annual only - 16%Annual and Quarterly - 34%Annual, Quarterly, Monthly - 50%



National Practices in compilation of External Trade indicesResults: Problems encountered



National Practices in compilation of External Trade indicesResults: ESCWA countries

Respondents: Egypt, Jordan, Kuwait, Oman, Qatar, Syria, TurkeyEgypt – Annual; Unit Value (Paasche), Quantum (Laspeyres); CAPMASJordan – Monthly, quarterly and annual; Price (Laspeyres); HS and BEC; Customs

records; DOSKuwait – Annual; Unit Value (Paasche), Quantum (Laspeyres); Customs records, oil

authority, Kuwait airlines; CSOOman – Annual; Unit Value (Laspeyres); SITC section; Customs records; Ministry

of National EconomyQatar – Annual; Unit Value (Fisher), Quantum (Fisher); Customs records; Planning

CouncilSyria – Annual; Unit Value and Quantum (Laspeyres and Paasche); SITC section

and division; Customs records; CBS



Export Import Price Index (XMPI) Manual - 2008

• Draft Manual available on the IMF website:

http://www.imf.org/external/np/sta/tegeipi/index.htm

• Draft written in coordination with ILO, IMF, ECE, OECD, World Bank, Eurostat, and UNSD




ForewordPrefaceReader's guide1. A summary of XMPI methodology2. Unit value indices3. Background, purpose, and uses of

export and import price indices4. Valuation, timing, coverage, and

classification5. Data sources6. Sampling issues in price collection7. Price collection8. Treatment of quality change9. Item substitution, sample space, and

new goods10. An overview of export and import

price index calculation 11. The treatment of specific products12. Errors and bias in the export and

import price indices

13. Organization and management14. Publication, dissemination, and user

relations15. The system of price statistics16. Index number theory17. Axiomatic and stochastic approach18. Economic approach19. Transfer prices20. Price indices using an artificial data

set21. Elementary indices22. Quality change and hedonics23. Treatment of seasonal productsGlossaryBibliography

Background




ForewordPrefaceReader's guide1. A summary of XMPI methodology2. Unit value indices3. Background, purpose, and uses of









Practice of compilation

Practice of compilation



Export Import Price Index (XMPI) Manual - 2008ForewordPrefaceReader's guide1. A summary of XMPI methodology2. Unit value indices3. Background, purpose, and uses of









Theoreticalaspects



Export Import Price Index (XMPI) Manual – 2008Summary – 100 pages

1. Uses of XMPIs2. Unit value indices and price indices3. Basic index number formulas and economic approach4. Elementary Price indices5. Concepts, Scope and Classifications6. Source data: Customs and Surveys7. Adjusting Prices for Quality Change8. Weights9. Publication and Dissemination



Export Import Price Index (XMPI) Manual – 2008Unit Value and Price Indices

Unit Values Indices and their potential bias:• Unit value are suitable for the aggregation of price changes of

homogeneous items• Mains advantages of unit value indices are their coverage and

relatively low resource cost• Some unit value changes are highly volatile• For heterogeneous items, bias arises from compositional changes in

exported /imported goods• Changes in quality are not taken in account• Problematic measurement of quantities by Customs• Unit value indices rely to a large extent on outlier detection and

deletion• Outliers detection routines may remove some of the signal as well

as the noise



Export Import Price Index (XMPI) Manual – 2008Unit Value and Price Indices

Strategic options:

• A move to price indices based on establishment surveys has resource consequences

• The Manual advises that countries using unit value indices undertake a staged progressive adoption of hybrid indices with, overtime, increasing proportions of unit value indices being substituted by establishment-based survey data



Export Import Price Index (XMPI) Manual – 2008Concepts : Valuation, Coverage and Classifications (chapter 4)

• Coverage : linked to the SNA 1993 definition

• Time of recording : Change of ownership

• Commodity classification : HS, SITC, BEC, CPC…

• Valuation:

• Unit value indices : CIF / FOB value

• Surveys: basic price for exports, purchaser price for imports (but in practice: deflators should be consistent with nominal values of imports/exports…)



Export Import Price Index (XMPI) Manual – 2008Data Sources

1. Customs Records

2. Enterprise Surveys• Concepts are close to those used in other price surveys (Production

Price Index)

• Sampling must be used for both the establishments surveyed and the commodities exported or imported

• Samples must be unbiased and cost-effective

• Data can be collected by various means: postal survey, personal interview, telephone interview, Internet data provision



Export Import Price Index (XMPI) Manual – 2008Data Sources (chapter 5)



Export Import Price Index (XMPI) Manual – 2008Summary – Appendix 1.1 : Basic Steps in XMPI Development

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