Quality evaluation for quarterly proxy variables of real output
Unit Labour Costs (ULC) are calculated as the ratio of total labour costs to real output. In the OECD System of Unit Labour Cost Indicators the target variable for the quarterly indicator of real output is constant price value added compiled according to the System of National Accounts 1993 (SNA93). Where this target variable is not available a production index covering the respective economic activity is sought.
The correlations give an indication of the reliability of the quarterly real output proxy variable used in the compilation of the ULC for the relevant country and economic activity. A low correlation implies that users should take caution when viewing the resultant quarterly ULC prior to reconciliation with annual benchmark data (which generally occurs with a 12-18 month lag). However the following processes used in the OECD System of Unit Labour cost Indicators also need to taken into account when understanding how these proxy variables are treated:
The OECD has performed extensive testing of both the Fernandez and TRAMO-SEATS methodologies. These methodologies together ensure that the quarterly series is in line with the countries authoritative annual SNA93 data and the quarterly volatility is reduced but at the same time effectively extracting the underlying signal from the raw data.
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Main Economic Indicators