The accuracy of national accounts estimates and their comparability across countries depend on timely revisions to GDP and its components. The frequency of revisions varies: some countries revise numbers each month, others quarterly or annually, and others less frequently. Such revisions are usually small and based on additional information received throughout the year. However, in some cases larger revisions are required to introduce new methodologies including changes to the reference year for constant price series. The new reference year should be representative of the normal operation of an economy, in other words, a year without major shocks or distortions.
Comprehensive revisions to GDP and other national accounts estimates often result in upward adjustments as improved data sources increase coverage of the economy and as new weights for growing industries more accurately reflect their contributions. These revisions may cause breaks in series unless they are applied consistently to historical data.
Current Practices for Incorporating Revisions in World Development Indicators
For constant price series, a break resulting from rebasing can be eliminated by linking the prior series to the new using historical growth rates. For nominal estimates a break in the time series is not adjusted unless the national statistics office revises the series back in time. Because rebasing real GDP and its components leaves the pre−base year current price series unchanged, the GDP deflator calculated from these two series may be distorted for the period prior to the new reference year. Other series that may be affected by a break in GDP time series include fiscal indicators expressed as a percentage of GDP. When nominal GDP is revised upward, the ratio of revenue and expenditure to GDP, for example, appears smaller than previously reported.