I. Reaction From the Italian Authorities on Fund Staff Recommendations
A Staff Mission from IMF, which was in Italy from 3–16 April, 2002, has sent a revised version of the draft Report on the Observance of Standards and Codes (ROSC) for our comments. The report has identified weaknesses in number of areas where statistical practices can be improved. The first point deals with comments on Fund Staffs Cross-cutting Recommendations, received from the Bank of Italy, the Italian Foreign Exchange Office, the National Institute of Statistics and from the Ministry of Economy and Finances. Comments on National Accounts and Prices were received from the National Institute of Statistics, while the Bank of Italy and the Italian Foreign Exchange Office submitted comments on Monetary Statistics and Balance of Payments Statistics. All Agencies have prepared comments on Government Finance Statistics.
A. Cross-cutting Recommendations
Statements by all Agencies
Promote understanding of revisions by providing statements about the schedule of revisions and other aspects of revision policy. Clearly flag data that are provisional.
Concerning Quarterly National Accounts, since the mission of the IMF in April 2002 provisional data subject to be revised in successive releases have been flagged in the press release (see footnote to Table 1 in the preliminary release for 2002 quarter II published on the 9th of August). Further explanations on the routine revision policy followed have been added in the “Explanatory Notes” at the end of the press release itself.
Similar explanations and flags will be added to the press release of Annual National Accounts when they will be provided to users at the beginning of March 2003, and for other data published by the National Accounts Directorate.
Concerning balance of payment statistics, following the IMF mission in April 2002, the revision policy is now described in the national publications (see the UIC’s “Bollettino Statistico”, also available on the UIC website). Similarly, the revision policies for balance of payments and monetary data will be stated in the Bank of Italy’s “Supplement al bollettino statistico”.
Carry out studies and analyses of revisions routinely to shed light on how statistical processes can be improved. Publish revision studies and analyses to inform data users about accuracy and reliability.
Recently, a study on major occasional revisions of annual and quarterly Italian National Accounts has been published in Eurostat (2002), ‘Workshop on Quarterly National Accounts’, Working Documents, Luxembourg.
Measures of revision errors of National Accounts are currently estimated and checked. They will be introduced in the press release of Quarterly and Annual National Accounts on a regular basis.
A study on the quantification of the trade-off between timeliness and accuracy of Italian Quarterly National Accounts considering both preliminary and complete estimates of Main National Accounts Aggregates is currently under way and supposed to be completed by Istat by the end of March 2003.
Concerning monetary data, revisions have usually been negligible; therefore no revision studies of a general nature have appeared necessary so far. The Bank of Italy concurs with the Report that all relevant information on revisions will have to be provided to the public should a pattern of significant revisions emerge in the future. Concerning balance of payments data, where revisions do occur, the Bank of Italy and UIC agree that revision studies and analyses are important. The matter is also being considered at the European level, in a joint project of the ESCB and the Commission (Eurostat). A pilot exercise, in which UIC participates, is being carried out. After a fine-tuning period, and depending on the outcome of the exercise, a selected set of indicators, including revision indicators, may be disseminated.
Regularize contacts with users other than those represented in official committees and tasks forces at the national and European levels to learn about their data needs.
Istat already has regular contacts with users through focus groups and users’ surveys. Concerning monetary data, users of statistics have traditionally being offered a range of channels to convey their needs, among which: direct interaction and co-operation in research; active participation in seminars and conferences; specific data requests. Nevertheless the Bank of Italy and the UIC recognise that a regular framework for collecting users’ views is useful. The design of such a framework, probably web-based to ensure maximum coverage and cost-effectiveness, will be considered in the work programme for 2003.
Identify knowledgeable persons in, e.g., press releases and publications, who can answer inquiries about the data.
All agencies agree on the need to identify knowledgeable persons in publications and releases, who can answer inquiries about the data. To this end, the Bank of Italy plans to extend the services offered by the recently developed web-based application to access and download publicly available statistics, in a few months’ time, with an e-mail facility for data requests and information; the e-mail address(es) will be reproduced in all statistical publications. Istat is already compliant.
Update the SDDS metadata posted on the DSBB and submit summary methodology statements for the remaining data categories.
SDDS metadata posted on the DSBB are regularly updated. The part referring to procedures on internal government access (ECB access) to balance of payments data prior to the release was updated as a result of the IMF ROSC mission.
B. National Accounts
Statements by Istat
Increase the number of permanent staff in the national accounts directorate in view of the strongly expanded compilation program.
Istat is aware of the scarcity of human resources in the national accounts directorate and is taking appropriate measures. The increasing requests coming from users and the extensive requirements of the EU and the ECB for new and more timely information strongly contribute to pressure on existing resources. Further, as such requests will have in most cases a ‘permanent effect’ on the increase/coverage/quality of the activities carried out by the directorate, they would be faced with an increase of the permanent staff. Financial (and legal) constraints pose some limits to the recruitment of human resources and their effective participation to the statistical production process requires for a ‘learning period’ in contrast with more urgent deadlines.
Investigate and implement ways to improve the response rates of Istat’s mandatory enterprise surveys.
Two main surveys are yearly made at Istat to monitor the economic performance of Italian enterprises. The first one (called SCI survey) is a total survey on larger enterprises with 100 or more persons employed, while the other one (PMI survey) is a sample one, dealing with smaller enterprises (up to 99 persons employed). Both surveys have been projected and structured in order to fully satisfy the Council Regulation No 58/97 concerning Structural Business Statistics (SBS). This Regulation requires the production of estimates broken down by a four digits level of Nace.rev.l.
Both surveys have been the object to an innovation process which has already produced important results. Innovations have been necessary in order to face the lowering of the response rates which took place during the ′90s. In year 2000, PMI response rate was 53.8% while SCI response rate is about 50%. Important improvements in response rates have been obtained already in year 2000 data due to major efforts made in soliciting and calling non respondents, and as a result of a closer collaboration and co-operation with enterprises’ associations (i.e.: Confindustria).
Other initiatives have been undertaken in order to increase the quality of the estimates produced. The sample size of PMI survey has been enlarged (120 thousands enterprises in year 2000). The methodology used in order to estimate the universe is based on calibration estimators technique. This methodology consists in a iterative process which assumes as auxiliary variables the population of enterprises and the total amount of persons employed. During iterative process the weight of every single enterprise changes in order to equalize the number of enterprises estimated from the sample to the one of universe. The treatment of partial and total non responses in SCI survey has been made through the use of an administrative source: the data set delivered to Istat by the Chambers of Commerce containing the complete financial statement of limited enterprises. The degree of coverage of this administrative source is nearly 95% among the population of firms with more than 100 persons employed, object observed by SCI survey; this source is fully compatible with EC standards and highly compatible with the requirements of SBS Regulation. In year 2000, the population observed by means of SCI survey represented 38.6% of industry and services value added and 37.5% of total employees. The use of administrative data has brought the degree of coverage of Istat data very near to 100%. In July 2002, the data produced with this new procedure have been transmitted for the first time to Eurostat.
The improvements obtained with reference to year 2000 data are only a first step, hi the production processes of year 2001 data major improvements will be adopted.
The use of Chambers of Commerce data will be extended to all the enterprises with more than 19 persons employed: in that size class the degree of coverage of this administrative source is in fact nearly 80%. The enterprises with 20 to 99 will be then totally surveyed.
Also the production of data on the enterprises with less than 20 persons employed will be involved in an innovation process. This size class represents 98% of Italian enterprises and almost 40% of total value added. After an experimental phase, for the reference year 2001 tax data will be used together with survey data: the level of their quality is comparable to that of Chambers of Commerce data. In particular, 120 thousands enterprises will be sampled and surveyed, and estimates will be produced using both survey data and tax data on 300 thousands enterprises (those in the sample plus 180 thousands enterprises).
So, year 2001 data will be produced by means of:
a total survey on enterprises with 20 or more persons employed. Through the use of Chambers of Commerce data, the degree of coverage of the available information will be 95% for the enterprises with 100 or more persons employed and 80% for the rest;
a sample survey on 120 thousands enterprises with less than 20 persons employed, with auxiliary information from tax data covering an other subset of 180 thousands enterprises.
This innovation process has already been appreciated and fully accepted by Eurostat. With the delivery of year 2001 data this process will place Istat’s structural business statistics at the top of the international standards.
Develop short-term statistics on changes in inventories
Istat agrees on the recommendation to develop specific surveys for obtaining information on a quarterly basis for changes in inventories. Whilst such surveys, conducted on a regular basis, would provide useful information for introducing balancing techniques in Quarterly National Accounts and for a deeper understanding of business cycle fluctuations, they surely require additional financial resources. This has to be taken into consideration, particularly when dealing with statistical information whose quality is generally considered to be feeble even for lower frequency observations.
At present, Istat is evaluating costs and benefits associated to the development of this recommendation by the IMF.
Other key recommendations
Increase the detail of goods and services in the analysis of intermediate consumption. This will require the availability of recent information on cost structures, for instance from regular triennial surveys.
Please see the previous comment on Investigate and implement ways to improve the response rates of Istat’s mandatory enterprise surveys.
Balance the accounts simultaneously at current and constant prices
At present, Annual National Accounts are balanced at current prices using the Stone, Chanpernowne and Maede (1941) approach. Istat agrees with the recommendation of the Mission to extend the use of balancing procedures to constant price estimates and a study is under way on further sources needed (i.e. in the framework of the input-output price system used for the double deflation approach) to implement this recommendation.
C. Consumer Price Index
Statements by Istat
Coordinate efforts to redesign the sample of outlets, items, and varieties used by municipalities in order to reduce sample bias and the very large number of price quotations collected each month. These efforts become even more urgent as Istat plans to increase the number of municipalities covered.
So far the outlet samples have been made on a judgmental basis directly by the municipality’s staff, according to broad rules laid down by Istat. Regarding the possible bias of the current outlet samples toward traditional stores, Istat is planning to investigate the situation in detail through an exploration of information already provided by the municipalities (that utilise standard identification codes for the surveyed outlets). In the short term a research project will be developed to evaluate the possibility to move towards a probabilistic design of the outlet and products sample, considering both the error size and the cost associated with different options. The study of the sample design must take into account that CPI indexes are also produced at a low territorial level and the minimum number of price quotation for each item must be sufficient to obtain significant estimates.
Move the whole price collection period into the reference period and aim at a consumer price index release date around the 15th of the following month.
Istat has recently started to study the possibility of changing the collection period (so that matches) in order to match the reference month. However, any change has to be planned carefully as the reorganisation of the survey could affect the timeliness of the data release (that must be maintained in line with European requirements) and the time pattern of the temporary price reduction effects.
Extend the use of handheld computers in data collection.
Istat considers the extension of computer assisted data collection (that is already used by a number of municipalities) as a strategic instrument for the improvement of the survey’s quality. Istat is developing a new project aimed at providing both financial support and statistical assistance to municipalities involved in the survey that accept the introduction of the use of handheld computers for price collection.
Other key recommendations
Provide resources for the acquisition of more efficient equipment for the understaffed statistical offices of various municipalities.
Istat aims at involving in the survey the municipalities that currently are non participating. As many municipalities lacks the resources needed to organise the data collection process, Istat is trying to launch a programme providing basic computer equipment and funding the training of new personnel for municipalities accepting to enter the survey. However, as the financial cost of the programme is very high, its timing is strictly conditional on the resources made available for the consumer price survey.
D. Producer Price Index
Statements by Istat
Investigate and implement ways to improve the response rates of Istat’s mandatory enterprise surveys.
Finalize the revision of the sample, questionnaires, and data collection procedures for the PRODCOM and enterprise surveys. As a result of the revision, it should be possible to improve the accuracy and timeliness of the weight data. Meanwhile, use national accounts data as far as possible to determine the weights for activity groups (at the level of products, sufficient detail is not available).
For the time being, Istat is involved in updating its own weight system procedure, using structural business statistics derived from either enterprises surveys data (the SCI survey concerning large enterprises) or sample survey data (the PMI survey concerning small enterprises). Furthermore, as EU recommends that annual production census data, turnover statistics, and PRODCOM statistics are used for the base year, Istat Price Division uses various sources. National account data for setting up the weights main frame will also be considered in order to improve the accuracy in determining the weights for activity groups and to harmonise information coming from different data sources. On the other hand, data collection procedures for the surveys SCI and PMI have been improved by simplifying the questionnaire, by increasing the number of visits to the enterprises and adopting quality adjustment procedures for checking and replacing non responses. Both SCI survey and PMI survey, in fact, have been largely innovated (with new procedures concerning the treatment of partial and total non response, and an enlargement of sample size of PMI) and the response rate has increased significantly during 2000. Overall, the use of administrative sources (namely Chambers of Commerce data) has been very useful in the treatment of non responses in the SCI survey. These innovations have been appreciated and fully accepted by Eurostat and will result in a substantial increase of the quality of structural business statistics.
Other key recommendations
Consider introducing in the ongoing producer price index revision the use of the chain version of the Laspeyres formula with annual links in order to capture the rapid structural changes in industry.
Concerning the FMI recommendation about the use of chain version of Laspeyres formula, Istat has started to develop simulations and studies aimed at defining the costs and the reliability of this approach, taking into account the issues concerning the yearly updating of the weighting system. Furthermore, Istat is working on the procedure to compile the new producer price index on foreign market that, according to the EU recommendations, should be based on chained prices indices. Consequently, in order to adopt a coherent approach in the compilation of domestic and non-domestic price index, Istat has to consider the opportunity of using the chain version of the Laspeyres index for the domestic price index too.
E. Government Finance Statistics
Statements by all Agencies
Clearly assign to one body the responsibility and authority for compiling and disseminating a comprehensive, integrated set of government finance statistics. In order to retain the benefits of validating existing datasets against each other, maintain each agencies’ responsibilities for the separate components.
Expedite the work of the high-level Commission investigating the discrepancy between distinct measures of government borrowing and financing.
Regularly disseminate government finance statistics in a presentation that completely integrates accrual data on revenue, expenditure, and financing transactions. Also, disseminate an equivalent presentation of cash-based data and a reconciliation between the two presentations.
The work of the high-level Commission currently investigating the discrepancy between different measures of government borrowing and financing is expected to provide the basis for the production of a comprehensive set of government statistics.
The need for a permanent analysis of the consistency between the different components of government finance statistics is considered a priority by the three agencies currently involved in their production (the Bank of Italy, ISTAT and the Ministry of the Economy and Finance). To this aim, sharing the IMF recommendation, the three agencies agree on the fact that ISTAT should chair a permanent committee, where the three agencies are represented on an equal basis, having the responsibility for validating against each other the independently compiled datasets. Moreover ISTAT should be responsible for the dissemination of a comprehensive, integrated set of statistics. Each agency would continue to disseminate the statistics that fall under its own responsibility.
Other key recommendations
Strengthen arrangements for collecting timely and comprehensive data from local government units, taking into account the additional needs arising from devolution.
The authorities concur that improving the timeliness and comprehensiveness of data collection from local government units is highly desirable. To this aim, all the agencies involved in the production of government finance statistics are currently co-operating in specific projects. An example of this is the Financial Bill for the year 2003 which includes measures aiming at increasing data quality and quantity in order to face the higher needs arising from devolution. Stronger arrangements for the collection of timely and comprehensive data from local government units are also provided for. The launch of the General Government Network RUPA (Rete Unitaria della Pubblica Amministrazione), currently at an experimental stage, will allow to further advance in increasing quantity and timeliness of data from all the public institutions.
Disseminate information on the main concepts, sources, and methods used in compiling government finance statistics.
Implement the analytic framework and classifications of the GFSM 2001 and develop a “migration” path for the full implementation of the system.
The proposed new framework for the compilation and dissemination of integrated public finance statistics would be a prerequisite for the full implementation of the analytic framework and classification of GFSM 2001.
F. Monetary Satistics
Statements by Bank of Italy
Where appropriate, distinguish in the BI’s statistical publications data on MFI assets and liabilities according to whether they are held/incurred by the ECB, national central bank(s), or other MFIs.
While the distinction between central banks and commercial banks in MFI statistics goes beyond current European statistical requirements, the Bank of Italy recognises that such a distinction is informative for users. Therefore the Bank of Italy plans to extend substantially the range of information for which the distinction is provided in the course of 2003, when other changes to monetary statistics are to be made, following new ECB statistical regulations.
Adopt the guidelines of the MFSM on the (i) instrument classification (e.g., classification of nonmarketable securities, and financial derivatives) and (ii) valuation of financial assets and liabilities (e.g., securities held to maturity, debt securities issued, and financial derivatives).
The current classification of so-called nonmarketable securities is based on the fact that such securities can in fact be traded although not in a regulated market. Furthermore, a different classification (as loans) would raise the issue of consistency with other financial statistics at the national level as well as with Eurosystem statistics. However, in the light of the Fund’s findings, the issue will be given further consideration in the course of 2003. – Concerning the classification of derivatives and certain details of the valuation of financial assets/liabilities, the consistency between the MFSM guidelines and Italian accounting rules will have to be examined, in order to verify whether supervisory report can be adjusted to provide the necessary input.
Reclassify special advances granted by the BI to banks under the Treasury Ministry Decree of 1974. These advances are currently included in “remaining assets,” and should be classified in “Loans to euro area residents MFIs,” in Table 8 of Supplements to the Statistical Bulletin—Monetary and Credit Aggregates of the Euro Area: the Italian Components (“Italian component of the aggregated balance sheet of the Eurosystem”).
Special advances granted under the Treasury Ministry Decree of 1974 are financial arrangements from the period preceding Stage Three of the EMU and do not represent refinancing operations or lending facilities of the Eurosystem. Therefore they cannot be classified as “Lending to euro area financial sector counterparts”. Thus the Bank of Italy is currently not in a position to modify the statistical treatment of these advances.
G. Balance of payments statistics
Statements by Bank of Italy and Italian Foreign Exchange Office
Improve the coverage of cross-border financial transactions settled through nonresident banks by accessing data available in international databases, such as from the BIS and the CPIS.
With reference to the need to improve the coverage of cross-border financial transactions settled through non-resident banks, the UIC has recently benefited from the new data derived from the fiscal amnesty measures adopted by the Government in 2001. The new data have been taken into account in the compilation of IIP as of the end of 2001. Comparisons with BIS data is periodically carried out, at both the Italian and the European (ECB) level. The studies show a number of difficulties and inconsistencies for the geographical breakdown. A systematic use of the BIS data could be implemented as soon as the studies will be completed and stabilised. The systematic use of the CPIS data, which is an other important tool for improving the coverage, may be planned after 2003 when series of sufficient length will become available.
Investigate the bias in the provisional monthly (and quarterly) estimates of goods trade and, through a coordinated effort of Istat and UIC, find ways to improve the estimates.
The bias in the provisional estimates of goods trade will be further investigated. The UIC is ready to take into account new data or estimates from Istat.
Prepare an updated document describing the current methodology, including the new surveys on transportation and tourism, and the roles of the BI and UIC in compiling and analyzing the balance of payments.
The Bank of Italy and the UIC plan to publish in 2003 a comprehensive methodological document on the balance of payments, by assembling methodological information currently published on the ECB “BOP Book” and other national sources. A description of the UIC surveys on transportation and on tourism will be included.
Other key recommendations
Reclassify the items that are not in line with the BPM5: (i) record income from loans between affiliated enterprises under direct investment income, rather than as other investment income as at present; (ii) record the remittances of workers who stay abroad more than one year as transfers, rather than as compensation of employees; and (iii) identify the interest component of the settlement of trade credits and record it under other investment income.
Regarding the recommendations to reclassify the items that are not in line with the BPM5:
A feasibility study referred to income on intercompany loans will be carried out during 2003. Useful information is to be derived from the combined Portfolio investment and Direct investment survey and from data already available in the CVS (statistical currency report) forms.
A revision of the historical series for workers remittances and compensation of employees is planned. The revision should be completed by the end of 2003.
A dedicated survey appears necessary for the estimation of the income on trade credits. The problem will be investigated in the framework of trade credits data.