Working Paper no. 83: Volatility of national account data for Iceland and other OECD countries
Date: April 2020
Author: Ásgeir Daníelsson
The working paper can be accessed here: Working Paper no. 83: Volatility of national account data for Iceland and other OECD countries
The Central Bank of Iceland has published a new working paper on volatility in national account data for Iceland and 33 other OECD countries. Three different measures are applied on three different types of data: raw quarterly data, seasonally adjusted data and annual data. GDP in Iceland is volatile but there are OECD countries where volatility is larger.
Seasonal adjustment decreases volatility but much less so in Iceland (and in Ireland) than in many other countries. Seasonal adjustment decreases volatility in consumption in Iceland more than it decreases volatility in GDP. For that reason volatility in seasonally adjusted consumption is significantly lower than volatility in seasonally adjusted GDP while the opposite is the case when volatility in unadjusted data and in annual data is considered. In this paper we derive formulas based on autocorrelations for the ratio of volatility in annual data and volatility in quarterly data.
In the paper we consider if the data supports the suggestion that there is a negative relationship between volatility in GDP and the size of the economy, and confirm for our data set the results in earlier research that this is the case. This relationship is used to estimate if the volatility in GDP in Iceland is more than what should be expected when the small size of the economy is taken into account. The evidence suggest that this is the case.