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December 1, 1974
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Analyst: St/SD (Project 00. 6944) CONTROL RECORD FOR SUPPLEMENTAL DISTRIBUTION STATINTL DISSEM: 13 Feb 75 NO ELITE SERIES NUMBER A (ER) 74-64 (CRS seri CLASSIFICATION OF REPORT s) UNCLASSIFIED DISTRIBWION TO RC 75, DATE OF DOCUMENT December 1974 NUMBER OF COPIES 430 NUMB N RC -910 3 COPY RECIPIENT DATE WAS) SENT RETURNED 2 cys DDI_ 21 Jan 75 1 cy D/QER 'I 1 cy DD OER.- 1 cy via,0 D OER If 1 cy SA ER & D SA ER STATINTL 1 cy Ch/St/SD " 1 cy St SD " 1 cy D_/NIO 1 cy OINIO/EC STATINTL 1 cy NIO/EC MEMC TO HOLDERS SENT TO THE ABOVE RECIPIEN TS AND ALSO O CIA I TERNAL'REaIPI-E&TS - see tnerno to holders th at is attached:' ALL R EMAINING COPIES AND EXTERNAL COPIES C RRECTED AN DISSE 13 Feb 75. 2 cys USIA 13 Feb 75 3 cys OSR/PA/M 1 cy NSC via CRS/DSB STATINTL 1 cy DDO/EA via CRS/DSB 1 cy Randy Huffer, ERDA via CRS/DSB if STATINTL 1 Cy Susan ,Swenson, Federal Reserve Board If via CRS / DSB 1 cy OGCR/Pub Staff, 507, Magazine 1 cy D/LA 14 Feb 75 1 c D/SA 25 Feb 75 l cy 28 Feb 75 2 c vs 13 Feb 75 1 c " 1 c Margaret Kane, Treasury/Ly 27 Feb 75' EA 3E NOTE: When copies are returned check toma ke sure that th ey have w page (deletion on .; 7 --reference to Appendi x B). Also Ap endix R shou ld be deleted, STATINTL r) A An C~ STATINTL Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 P E E T COPY DA TE CI I N N R SENT RETURNED . - -y :7P STATINTL CA hA't S STATINTL STATINTL X 4'A - -An zZ Ckp,, -7 STATINTL U tOL 7,e, STATINTL 7 ST8TINTL e a -k, STATINTL STATINTL STATINTL STATINTL 1.26 CA, 76 -7 6 STATINTL L c 5' STATINTL 1 \ a I % o 7'h-cam- 7 ctX c1 Srv~a~ 7 Approved For Release 2000/05/11 CIA-RDP79-00928A000100100001-3 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001 c Pa CONTROL RECORD FOR SUPPLEMENTAL DISTRIBUTION SERIES NUMBER OF DOCUMENTS C SSIFICAT N OF-itEPORT COPY NO. (S) STATINTL 7 7' Approved For Release 2000/05/11 : CIA-RDP79-00928A000 100100001-3 FORM 2.65 2353 COPY pprove or Release 20370 J ENT NO.(S RECIPI11 ) Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 Aooroved for' e~leas~ R0~/05/11 : CIA-FR@LJ9 jA00019U09 L- 65) Dissem a ton is or eport, Recipient DDI/SSG, Room GE0442, I1q' JFinished Intelligence Proiect _ errrne~~l~/l Room 1 54 P.4Tl Bld , g Room 1E4846, Hq. ? 2 OTR/II, Room 926, CoC OWI, Room 1D1612, Hq. D/CRS, Room 2E60, Hq. CRS/ADD/Std. Dist. , Room GFZ8, Hq. OSR, Room 3F50, Hq. DCD/SD, Room 811, Key Bldg. D/OSI, Room 6F30, Hq. D/OPR, Room 3E58, Hq. D/OCI via SS/ADD/CRS, Room 1G38, Hq. INDICO, Room 7F30, Hq. D/OBGI, Room 1011, Magazine Bldg. Hq. STATINTL 1 STATINTL 1 12 6,200 y ~ t r3o) c ~Q7 / 0V '6 J 10I 01L 10i 4: l / NPIC/IB, Room 1S518, D/IAS, Room 15518, CGAS/HR, Rm. 2G40, I-1q. STATINTL STATINTL Chairman, COMIREX, Room 3E14, Hq. DDI Management Staff, Rn-i. 2F20, Hc1. Congressional Support Officer, Room 7F36, 1-1q. OER, Room 3G31, Hq. Mr. Nathan R. Einhorn, Document Expediting (DOCES) Project, Exchange and Gift Div., Library of Core a a, STOP 303 NSA, Room 2E024, Ft. Meade, Md. Department of the Treasury, Office of International Finance, Attn: Mrs. Birgitta Woods, Rm. 1438, 15th St. & Pa. Ave. , N. W. Defense Intelligence Agency, DS-4C, A Bldg. , AHS Mate, INR/CC, Room 6510, New State Bldg. Commandant, The National War College, Attn: NW CLB / CR, Attn: Mr. Robert A. rorguson NO ELITE J'/ / 84 - ?. / Agency Archives a'fte l e= Agency Records Center - Total: 430 copies Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 Approved For Release 2000/05/11: CIA-RDP79-Q092$AQ9?fiQ 'R 0001-3 MEMORANDUM FOR: St/A/R FROM: Chief, St/P/ C Dissemination of A (ER) 74-64, Methods of Constructing Economic Indexes From Income lete Data (Project 00. 6944), Unclassified You will receive 12 copies of subject report. It is requested that they be disseminated as indicated below. No. of Copies Recipient ~$ a St/SD fl St/CS ]l D/C D/U 2 D/I 1 D/S I D/D X5st]Mhxx Approved For Release 2000/05/11 CIA-Fiv p Q0100100001-3 Approved Fo G s x 'f: CITE 2M10j001-3 23 January 1975 MEMORANDUM TO HOLDERS OF RESEARCH AID A(ER) 74-64, Methods of Constructing Economic Indexes from Incomplete Data, December 1974 1. The numbers appearing in Appendix B are outdated estimates used solely for the purpose of testing the procedures developed in this Research Aid. Please do not use them for any substantive purpose. 2. A set of unclassified estimates of GNP and industrial production will be disseminated in a few months. Chief Production Staff Approved For PIA-V9.4 E1 M 01-3 W" ma. bd 1. houlkill RECORD OF REVIEW OF OER PUBLICATIONS FOR SECURITY/SANITIZATION APPROVAL SUBJECT 6 o O, (./ BRANCH EXTENS 10N SECURITY REVIEW SANITIZING INSTRUCTIONS ITEM DATE INITIALS REMOVE 25X1A UNEDITED DRAFT EDITED DRAFT DELETE RELEASABLE TO FOREIGN RECIPIENT YES NO 25X1C SUBSTITUTE REMARKS ^n I? f~ ,5 ,7 - /' o 2000/0-5/11 - - 0928A000100100001-3 FORM 2358 EDITIONS PREVIOUS SECRET 4-70 SECRET 11 : C41 R[3'P-79'00928A000100100001-3 GROUP 1 Excluded from automatic downgrading and declassification Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 Reference Aid Methods of Constructing Economic Indexes from Incomplete Data A (ER) 74-64 December 1974 Approved For Release 2000/05/11 : CIA-RDP79-00928A00010010 .G. le Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 This publication is prepared for the use of U.S. Government officials. The format, coverage, and contents of the publi- cation are designed to meet the specific requirements of governmental users. All inquiries concerning this document from non-U.S. Government users are to be addressed to: Document Expediting (DOCEX) Project Exchange and Gift Division Library of Congress Washington, D.C. 20540 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 R ES A Methods of Constructing Economic Indexes from Incomplete Data Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 METHODS OF CONSTRUCTING ECONOMIC INDEXES FROM INCOMPLETE DATA 1. In constructing indexes of an economy's performance, economists must sometimes work with incomplete data. A typical problem involves estimating missing values in a time series of industrial output, in order to compute an index of industrial progress over time. In particular, the estimation problem presupposes (1) an incomplete set of time series observations on quantities produced by several industrial sectors and (2) a complete set of corresponding unit values of output (for an illustrative set of data, see Table 1). The quantity produced by the jth of n sectors in the tth of m years can be labeled Q(j, t), and the time- constant unit value of the jth sector's output can be named P(j ). A time index of total value produced by the n sectors is then n E (P(j) X Q(j, t) ) I(t) _ n X 100 E (P(j) X Q(j,b)) j=1 where b is the base year from which the index is computed. The problem is to estimate the index I (t) for all years t=1, . . ., m, given that for each of these years some but not all of the quantity observations Q (j, t) are missing. Hypothetical Data on Industrial Output and Unit Values of Output Industrial Sector Unit Value of Output 1961 1962 1963 1964 1965 1966 1967 Ferrous metals 21 95 85 ? ? 190 ? ? Fuels 17 118 177 236 295 354 324 ? Electric power 87 23 ? ? ? 46 ? 56 Chemicals 43 47 56 65 75 84 94 103 Lumber 24 83 103 124 145 166 186 207 Building materials 4 503 402 477 ? 729 804 855 2. A procedure for this problem was suggested in 1960 by Kaplan and Moor- steen.1 Two alternative and equally plausible procedures for the problem are the Field method 2 and the naive method of linear interpolation, in which an analyst merely uses a ruler to connect adjacent quantity values in a sector's time series of output. 'Norman M. Kaplan and Richard H. Moorsteen, Indexes of Soviet Industrial Output, Vol. I, RAND Corporation, Research Memorandum 2495, May 1960. R.M. Field III, A Method of Constructing Index Numbers, unpublished memorandum, CIA, Office of Economic Research, September 1974. Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100100001-3 3. This publication ? explains each of the three methods, with reference to the sample data in Table 1; ? presents computer programs for each method; and ? tabulates Monte Carlo tests of each method on five different sets of Soviet economic data. Principal Findings 4. In our tests of the three methods, the method of linear interpolation usually produced the smallest errors in estimation. The Field method was second best, and the Kaplan-Moorsteen (KM) placed third. This ranking resulted partly from the fact that we based our tests on time series that usually grew smoothly. The Field method would probably have excelled, had the series followed a cyclical pattern. Further research might profitably be directed toward developing an es- timation method better than any of the three considered in this report and toward isolating classes of problems in which each method excels. Kaplan-Moorsteen Method 5. Step 1. Calculate benchmark indexes B (t) for years in which output data are available for each industrial sector. If the data are not complete for at least two years, the method does not apply. Since the sample data in Table 1 are com- plete for the first and fifth years (1961 and 1965), the benchmark indexes are 6 >; (p(j) X Q(1, 1) ) j=1 6 (I'(j) X Q(j, 1) ) j=1 6 >2 (P(j) X Q(j, 5) ) r,~, j=1 6 >2 (P(j) X Q(j, 1) ) j=1 where we have selected year 1 as the base year. 6. Step 2. Calculate average annual rates of growth between each successive pair of benchmark indexes. Since the sample problem contains only two bench- mark years (1 and 5) we calculate a single growth rate (M>X)/0 161 DR4-?M 171 Dc'.-?N 181 YDIDR;DC]1,1 Subroutine to Compute the Actual Indexes V ACTIND[ ^IV V ACTIND;AIN;IZ III M COMPUTE ACTUAL INDEXES [21 A]-?O 131 AIN