## Fixed Base Year vs. Chain Linking in National Accounts: Experience of Sub-Saharan African Countries

_IMF Working Papers, July 8, 2016_

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**Canonical URL:** [Fixed Base Year vs. Chain Linking in National Accounts: Experience of Sub-Saharan African Countries](https://www.imf.org/en/publications/wp/issues/2016/12/31/fixed-base-year-vs-44069)

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## Bibliographic details
- Authors: Robert Dippelsman, Venkat Josyula, Eric Métreau
- Published: July 8, 2016
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781475569339.001

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### Summary
- Two approaches for producing volume estimates of GDP are compared: fixed base year and annual chaining.
- Most advanced economies adopted the chain-linked approach in the past twenty years, while some African countries remain hesitant because of computation and data requirements, and resource constraints.
- Using detailed data provided by three Sub-Saharan African countries, simulations were run to assess differences in GDP growth estimates under the two approaches.
- Key conclusions:
  - The differences of GDP growth using the two approaches are small.
  - Differences do not behave in the consistent way found in advanced countries.
  - Weak deflation techniques and overly aggregated classifications used to derive volume measures can lead to large distortions.
  - Recommendation: improved deflation techniques and detailed classification should be addressed before adopting chain linking.

### Methodology and Data
- Simulations based on detailed data from three Sub-Saharan African countries.
- Comparative assessment of fixed base year versus annual chaining for producing volume estimates of GDP.
- Consideration of computation and data requirements, and resource constraints faced by some African countries.

### Findings
- Differences in GDP growth estimates between fixed base year and chain linking:
  - Small in magnitude based on the simulations.
  - Not consistent with patterns observed in advanced economies.
- Sources of larger distortions identified:
  - Weak deflation techniques.
  - Overly aggregated classifications for deriving volume measures.

### Policy Recommendations
- Prioritize improving deflation techniques before adopting chain linking.
- Adopt more detailed classification schemes when deriving volume measures.
- Address computation and data requirement challenges and resource constraints as part of transition planning to chain linking.

### Subjects and Keywords
- Subjects: Deflation, Economic sectors, GDP measurement, Manufacturing, National accounts, Price indexes, Prices
- Keywords: base year, chain, chain linking, CPI, Deflation, deflation technique, expenditure data, fixed base year, GDP measurement, Manufacturing, Price indexes, reference year, Sub-Saharan Africa, Sub-Saharan African, System of National Accounts, volume growth, volume measure, volume measures, WP

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/31/fixed-base-year-vs-44069_