Media Briefings

Substantial Revisions To Uk Gdp Statistics Only Likely Once Every Five Years

  • Published Date: July 2008

The Bank of England’s decision on the next move in interest rates can be decided by
tiny differences in economic statistics. But if such statistics are inaccurate, then
interest rate decisions may be made on the basis of wrong information.
A new report by Anthony Garratt, Gary Koop and Shaun Vahey, published in the
July 2008 issue of The Economic Journal, shows that the chances of ‘substantial’
revisions to GDP are less than one in twenty – roughly once every five years.
This is especially important as GDP figures are used by the Bank of England to
forecast future GDP and future inflation, and therefore affect decisions on
interest rates.
Statistics matter. If the Bank of England cuts rates on the basis of inaccurate
information, inflation could rise too high. Alternatively, if the Bank raises rates
because the statistics wrongly suggest the economy is overheating, then
unemployment could increase. And if the Bank ‘corrects’ rates as soon as the
accurate figure is known, then this could increase volatility.
The quality of UK GDP statistics now is a marked improvement on their quality
before 1990, when the then Chancellor of the Exchequer, Nigel Lawson, described
them as ‘little more than a work of fiction’. Part of the reason for the unprecedented
macroeconomic stability of the last decade and a half was better informed decisionmaking
by both the Treasury and the Bank of England.
But substantial revisions can and do still happen – as in 2003, when the estimate of
second quarter GDP growth was revised upwards from 0.3% to 0.6%.
The report looks at the chances of GDP being revised by more than the amount it
was revised in 2003, a change that generated considerable media attention. It finds
that the chances of a substantial revision for any one GDP statistic are less than one
in twenty.
Notes for editors: ‘Forecasting Substantial Model Revisions in the Presence of
Model Uncertainty’ by Anthony Garratt, Gary Koop and Shaun Vahey is published in
the July 2008 edition of The Economic Journal.
Anthony Garratt is at Birkbeck College, London. Gary Koop is at the University of
Strathclyde. Shaun Vahey is at the Reserve Bank of New Zealand.
For further information: contact Anthony Garratt on 020 7631 6410 (email:; Gary Koop on 0141 548 3862 (email:; or Romesh Vaitilingam on 07768 661095 (email: