This article provides new evidence on the rationality of early releases of industrial production (IP) and producer price index (PPI) data. Rather than following the usual practice of examining only first available and fully revised data, we examine the entire revision history for each variable. Thus we are able to assess, for example, whether earlier releases of data are in any sense "less" rational than later releases, and when data become rational. Our findings suggest that seasonally unadjusted IP and PPI become rational after approximately 3-4 months, whereas seasonally adjusted versions of these series remain irrational for at least 6-12 months after initial release. For all variables examined, we find evidence that the remaining revision is predictable from its own past or from publicly available information in other economic and financial variables. In addition, we find a clear increase in the volatility of revisions during recessions, suggesting that early data releases are less reliable in tougher economic times. Finally, we explore whether nonlinearities in economic behavior manifest themselves in the form of nonlinearities in the rationality of early releases of economic data, by separately analyzing expansionary and recessionary economic phases and by allowing for structural breaks. These types of nonlinearities are shown to be prevalent and in some cases to lead to incorrect inferences concerning data rationality when they are not taken into account.

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Journal of Business and Economic Statistics
Erasmus Research Institute of Management

Swanson, N, & van Dijk, D.J.C. (2006). Are statistical reporting agencies getting it right? Data rationality and business cycle asymmetry. Journal of Business and Economic Statistics (Vol. 24, pp. 24–42). doi:10.1198/073500105000000036