Price Indices for External Trade of Goods Eleonora Baghy 26/05/2013 MEDSTAT Study Visit on External Trade Statistics Hungarian Central Statistical Office Budapest Price Indices for External Trade of Goods Eleonora Baghy 26/05/2013

Overview Background, purposes History Methodology Dissemination Data Sources Sampling Price survey Unit values Index calculation Dissemination Macroeconomic analysis

Background, purposes (1) Price index of External Trade in Goods: Methodology Data: external trade statistics + price survey Measurement of Price level changes (conjuncture) Volume of exports and imports (deflation) Economic growth (real GDP) Competitiveness, seasonality e.g. (macroeconomic analysis)

Background, purposes (2) ∆Value=∆Price+∆Volume +∆Quality International recommendation: Filter quality changes from price index Real price changes Data collection Stricte definition of observed item

Unit values versus Price Indices (1) Price survey Commodity specification Coverage - non response, missing data Organisation – staff, special knowledges Costs

Unit values versus Price indices (2) Unit value indices: Widely used Based on External Trade Statistics Nomenclature not enough detailed Compositional effect – quality changes Low costs High coverage „Unit value indices are not price indices because their changes may be due to price and (compositional) quantity changes.” (XMPI Manual, Ch.2, Par.2.1, IMF 2009)

Unit values versus Price indices (3) Hybrid Method Unit values: relatively homogenious products relatively constant composition Price survey: heterogenious products short life cycle Stratisfaction: depends on structure of turnover National specialities

History of the Hungarian External Trade Price Statistics (1) 1959-1990: price index compilation based on survey few companies (about 50-60) coverage: 50-60% of turnover 2000 products - 5000 items/flow Fisher formula 1950-58: retrospective compilation of UVI About 300 items/flow Coverage: 55-60%

History of the Hungarian External Trade Price Statistics (2) 1991-2002: unit value indices Transition to market economy Liberalisation of external trade Change of data source Compilation quarterly Completed with surveyed price data (10-15%) Paasche-formula – quarterly compilation Fisher formula – years

History of the Hungarian External Trade Price Statistics (3) 1991-2002: unit value indices Sampling method: Cutoff sampling (threshold) Filter: Transaction code (processing) List of surveyed products Stratisfaction by: Flow (exports/imports) Commodity code SITC 3/2/1-digit Groups of countries

History of the Hungarian External Trade Price Statistics (4) 2003 - : Hybrid method Unit value indices Commodity sections 0-4 of SITC Food, beverages and tobacco Crude materials and oils, fats Fuels Price survey Commodity section 5-8 of SITC Chemicals Manufactured goods Machinery

Data sources (1) Price survey Unit values Questionnaire External trade database Extrastat Intrastat Statistical value in HUF Quantity (if available) or net weight Final purchase/sale

Data sources (2) Weights Difficulties: External trade database All types of transactions Difficulties: Fixed frames: - legal - methodological - quality of data

Price survey Sampling (1) Procedure Once a year - September Based on 12 months’ data (August previous year – July current year) Final purchase/sale No sample rotation

Price survey Sampling (2) Definition of item: Flow Product: 8-digit level of CN Specialities : + 3 digits Country of consignement/destination Technical parameters Commercial conditions Quantity unit

Price survey Sampling (3) Concentrated sampling method -top down Groups of countries 2-digit level of SITC Product (CN8) Country of destination/consignement Data provider company Technical and business conditions 1100 data providers - 4500 items Coverage: about 70%

Price survey – Data collection (1) Frequency: monthly by Internet Unit price In national currency At frontier parity (CiF; FOB) Period price (weighted average for a month) Substitutional prices Unit price for referenc period Unit price for previous period Remarks

Price survey Data collection (2) Verification, validation Completeness Data reporting application Verification – Microvalidation Missing data Substitution New items – overlap No fixed basket Personal contact

Unit values Sampling Procedure Once a year – December Cutoff method (threshold) + Concentrated sampling top down Chapters of SITC (1/2/3 digit) Product (CN8) No selection of countries Items: 450 (Import) 530 (Export) Coverage: about 75%

Index calculation (1) Arrangement of new year’s calculation Matching Collected prices: continous New items: estimation for December UV and weights: transposition tables Rebasing Prices : average price for the base year UV: weighted yearly average (∑V/ ∑ Q)

Index calculation (2) Quality changes Price survey: Unit values: Chain index Information from data provider Implementation of new items Revision of sample Unit values: Base indices of similar product/coutries

Index calculation (3) Compositional effect - Products - Countries Price survey – no UV – yes - Countries Prices survey – limited UV - yes

Index calculation (4) Data editing Processing : monthly Omission from calculation (both) Judgement approach (prices) Processing : monthly Previous year=100.0%

Index calculation (5) Aggregation: Elementary aggregation Price representants CN No turnover data Carli formula Higher-level aggregation CN SITC ( 3/2/1 digit) Fisher formula Weighting: external trade data Reference month (Paasche) Monthly average of previous year (Laspeyres)

Index calculation (6) Macrovalidation: Time series Terms of Trade Exchange rates (USD, Euro) PPI – export index Other informations: Companies Press Stock market (oil, wheat, iron etc.)

Dissemination First releases On-line database Calculation on two bases Main commodity groups Main country groups Calculation on two bases Same period of previous year=100.0% Previous month=100.0%

Use for macroeconomic analysis (1) International comparison – indices Limited – different: Nomenclatures Base period Currency Methodology Definition of price representant Sampling method Outlier detection Estimation of not-surveyed items

Use for macroeconomic analysis (2) Comparative analysis Sectorial competitiveness Geographical price indices Comparison of price levels (different countries) Lack of base data (prices) Prices = strictly protected information International databases – unit values

Thank you for your attention! Eleonora Baghy Eleonora.Baghy@ksh.hu