CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL

ADJUSTMENT

BY CHRISTOPHE PLANAS AND RAOUL DEPOUTOT

First Version received December 1999

Abstract. The Statistical Office of the European Community (EUROSTAT) currently

uses two different methods for seasonally adjusting macroeconomic indicators, through
the implementations of the programs X-12-ARIMA (Findley et al., 1998) and TRAMO-
SEATS (Gómez and Maravall, 1996). A major difference between the two methodologies
is that X-11 filters are of finite length while the signal extraction filters in TRAMO-SEATS
are infinite whenever the observed series model embodies a MA part. In this paper, we show
how infinite seasonal adjustment filters can be optimally approximated by finite ones, and
we apply this result to the problem of controlling the length of the revision period. We also
show how considering finite versions of the signal extraction filters improves the
interpretation of the X-11 filters in the model-based framework.

Keywords. Signal extraction; Wiener-Kolmogorov; unobserved components; seasonal

adjustment; ARIMA models; X-11 filters; X-12-ARIMA.

1. INTRODUCTION

The Statistical Office of the European Community (EUROSTAT) currently uses

two different methods for seasonally adjusting macroeconomic indicators,
through the implementations of the programs X-12-ARIMA (Findley et al., 1998)
and TRAMO-SEATS (Gómez and Maravall, 1996). The former is the last release
of the X-11 product family; traditionally, sequences of pre-existing moving
averages are applied to remove seasonality (Shiskin et al., 1967; Dagum, 1988).
The latter decomposes time series using signal extraction in stochastic linear
models of the ARIMA-type; see, for example, Box et al. (1978) and Burman
(1980). One of the major differences between the two methodologies is that the
X-11 filters are moving averages while the Wiener–Kolmogorov (WK) filters
(Whittle, 1963) derived from ARIMA models embodying a MA polynomial have
a rational form. Hence, while the X-11 filters are of finite length, such WK filters
are infinite. That property has some consequence on the problem of revising
preliminary figures that most statistical offices face: in model-based decomposi-
tions, the process of revising until historical estimators are obtained can last
relatively long, and, in general, the number of periods needed to obtain a final
estimator cannot be controlled by the analyst.
Our objectives in this paper are first to extend the model-based signal extraction
methodology so as to make possible the control of the revision period, and, second, to

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Malden, MA 02148, USA.
194 C. PLANAS AND R. DEPOUTOT

improve the understanding of the differences between ARIMA-model-based and

X-11 decompositions. We shall develop the analysis using the so-called airline model
(Box and Jenkins, 1970). The main reason is that, in many cases, it is the model that
TRAMO-SEATS selects. We shall see that this model can generate seasonal
adjustment filters which are very close to the X-11 ones, so the two programs can give
very similar adjustments. Besides, the airline model is a typical example of model
yielding rational signal extraction filters. For such cases, we develop a procedure
which allows practitioners to control the length of the revision period, on the basis of
finite approximations to linear filters. Given an observed series, a stochastic linear
model describing its second moments, and the specification of the length of the
revision period found acceptable, an optimal model-based decomposition is derived.
Using the finite approximations to linear filters, we then re-examine the links
between the signal extraction and the X-11 filters. That question has been the
subject of attention in the statistical literature: Cleveland and Tiao (1976) and
Burridge and Wallis (1984) showed that there exist unobserved component
models for which the X-11’s estimators are very close to the model-based ones.
We show that Burridge and Wallis’ model-based interpretation can be improved if
some finite approximations to the optimal signal extraction filter are considered.
This result confirms that the major difference between the two methodologies can
be attributed to the respective dimension of the filters involved, i.e. finite versus
infinite; it suggests that there may exist a model and a truncation level so that
X-11 and the constrained model-based decomposition could almost coincide.
In Section 2, we introduce the notations and we discuss the similarities between
X-11 and some airline-generated signal extraction filters. Section 3 develops a
procedure for approximating infinite filters by finite ones. Section 4 briefly reviews
the analysis of revisions and introduces some tools used in the application. Section
5 applies the results to the control of revisions in the seasonal adjustment of a
macroeconomic time series. We also provide practitioners with guidelines for a
reasonable truncation of the revision period. Finally, Section 6 revisits Burridge
and Wallis’ model-based interpretation to the X-11’s default adjustment filter.
Notice that model-based seasonal adjustment can also been performed via
structural time series (STS) modelling (Harvey, 1989). The structural approach is
implemented in the program STAMP (Koopman et al., 1995); it performs signal
extraction via Kalman filtering and smoothing. For a given model decomposition,
Gómez (1999) showed the equivalence between WK filtering and Kalman filtering
and smoothing. Our results equally apply to signal extraction filters derived from
STS models.

2. MODEL SPECIFICATION

We assume that the observed series is well-described by the so-called airline

model (Box and Jenkins, 1970). Besides its popularity in the literature, this
model has an actual empirical relevance in that it has been found to provide

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 195
good fit to many series (Fischer and Planas, 2000). For monthly series, it is
specified as

rr12 xt ¼ ð1 ÿ h1 BÞð1 ÿ h12 B12 Þat ð2:1Þ

where B is the lag operator, r ¼ 1 ÿ B; r12 ¼ 1 ÿ B12 , and at is a white noise
variable. Without loss of generality we set V ðat Þ ¼ 1. The moving average
polynomial will be denoted hðBÞ; hðBÞ  ð1 ÿ h1 BÞð1 ÿ h12 B12 Þ. It will be assumed
invertible. For h12 > 0; the observed series admits a decomposition into
x t ¼ s t þ nt ð2:2Þ
where st is a seasonal component and nt , the nonseasonal part of the series. These
two patterns are described by the linear processes

SðBÞst ¼ hs ðBÞast
ð2:3Þ
r2 nt ¼ hn ðBÞant

where SðBÞ ¼ 1 þ B þ


þ B11 , and hs ðBÞ; hn ðBÞ denote polynomials of respec-

tive order 11 and 2 (Maravall, 1996). The variables ast and ant are independent
white noise with variance Vs and Vn , respectively. A unique decomposition
(2.1)–(2.3) is identified with the canonical requirement; see Hillmer and Tiao
(1982). This hypothesis is mainly used in reduced-form decompositions; STS
modelling usually identifies the component models with restrictions on the
order of the moving average polynomials (Hotta, 1989). Maravall (1985) and
Riani (1998) showed that, in spite of different identifying assumptions, the
basic structural model and the airline model have very similar features and,
eventually, yield similar decompositions. Our decision to focus on the reduced-
form decomposition is motivated by the fact that EUROSTAT currently uses
TRAMO-SEATS.
Minimum mean square error estimator (MMSE) of the nonseasonal
component is obtained via WK filtering (Whittle, 1963) according to
1
nt ¼ mn ðBÞxt ¼
^ R mni xtþi
i¼ÿ1
ð2:4Þ
hn ðBÞhn ðF ÞSðBÞSðF Þ
¼ Vn xt
hðBÞhðF Þ

For the seasonal adjustment of monthly series, the airline model has an interesting
feature: for some values of ðh1 ; h12 Þ, it yields optimal filters very close to the
historical X-11 ones. Table I reports the couples ðh1 ; h12 Þ yielding the WK signal
extraction filter the closest to the X-11 ones. The loss function used is the average
of the squared differences between the frequency transfer functions; it is reported
in Table I as d, and it will be explicitely defined in Section 3. The 20 seasonal
adjustment filters embodied in recent X-11 releases like X-12-ARIMA are
considered. They are obtained by combining the 3  3; 3  5; 3  9; 3  15 plus
the X-11 default for the seasonal moving average with Henderson trend filters of

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196 C. PLANAS AND R. DEPOUTOT

TABLE I
AIRLINE MODEL PARAMETERS YIELDING WK FILTERS CLOSEST TO X-11 FILTERS

Henderson MA
X-11 filters Seasonal MA 9-term 13-term 17-term 23-term
33 ðh1 ; h12 Þ (0.599, 0.400) (0.597, 0.384) (0.594, 0.375) (0.589, 0.364)
d 0.008 0.008 0.007 0.006
X-11 default ðh1 ; h12 Þ (0.583, 0.556) (0.583, 0.551) (0.583, 0.549) (0.583, 0.546)
d 0.007 0.007 0.007 0.007
35 ðh1 ; h12 Þ (0.583, 0.563) (0.583, 0.553) (0.583, 0.548) (0.583, 0.543)
d 0.009 0.009 0.010 0.010
39 ðh1 ; h12 Þ (0.583, 0.732) (0.583, 0.728) (0.583, 0.726) (0.583, 0.723)
d 0.012 0.013 0.013 0.014
3  15 ðh1 ; h12 Þ (0.583, 0.828) (0.583, 0.826) (0.583, 0.825) (0.583, 0.824)
d 0.013 0.014 0.014 0.015

length 9,13,17,23. The X-11 default mixes the 3  3 and the 3  5 seasonal moving
averages (Bell and Monsell, 1992).
As can be seen on Table I, the average square differences between frequency
transfer function of the two filters are always less than 0.015. The parameter h1
takes a limited range of values, while the range of variation of h12 is much
larger: it is the parameter which controls the width of the power-vanishing
band around the seasonal harmonics in the WK seasonal adjustment filter.
Figure 1 displays the frequency transfer function of the X-11 adjustment filters
obtained when the length of the Henderson moving average is set to 13, the
most common setting, together with the frequency transfer function of WK
filters obtained with the parameter values ðh1 ; h12 Þ given in the fourth column
of Table I. The frequency transfer function of the X-11 filter with 3  5
seasonal moving average is not displayed, because it is shaped alike the default
one. It can be seen that the airline model can generate signal extraction filters
that are very close to the X-11 ones. Since that model is selected in many
automatic TRAMO-SEATS runs, TRAMO-SEATS and X-12-ARIMA decom-
positions can be very similar. Maravall (1985) found analogous similarities
between decompositions obtained from X-11 and from the basic structural
model.
Notice, however, that X-11 filters cannot be exactly reproduced if attention
focuses on airline models. One reason is that X-11 filters are finite while WK
filters derived from ARIMA ( p, r, q) models with q > 0 are rational filters of
infinite length; see (2.4). Under the invertibility condition, the WK filter
converges, so (2.4) is anyway valid for periods around the centre of usual sample
lengths. For concurrent estimation, though, unknowns future observations must
be forecasted (Maravall, 1996) and, as new observations become available,
correcting the forecast errors will yield some revisions in preliminary estimates.
Hence, the use of a rational filter has an important consequence: in the process of
seasonally adjusting time series, the number of periods needed for a model-based
concurrent estimate to become a final estimator can be relatively large. Some

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 197

FIGURE 1. Seasonal adjustment filters: Frequency transfer function

model-based tools that are discussed in Section 4 can help in anticipating that
delay, but practitioners have no direct control on the length of the revision period.
In Section 3, we develop a procedure that enables practitioners to control the
duration of revisions.

3. FINITE APPROXIMATION TO INFINITE MODEL-BASED FILTERS

An obvious possibility for reducing the length of the revision period would be to
impose ARIMA ( p, r, 0) models for observed series. Yet such an approach
would limit the flexibility of ARIMA modelling in describing economic time
series properties. We thus choose to approximate infinite model-based filters with
finite ones. The wide use of the finite X-11 filters suggests that such
approximations could indeed be of practical interest. The final estimator will
then be slightly modified, in such a way that the convergence of preliminary
estimates will be faster.
Let aðBÞ denote an infinite symmetric linear filter such that
1
aðBÞ ¼ a0 þ R 1 ak ðBk þ F k Þ
k¼1 2
ð3:1Þ

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198 C. PLANAS AND R. DEPOUTOT

where the weights ai are real, do not depend on time, and satisfy Rai ¼ 1; ai ¼ aÿi ;
and Ra2i < 1. We consider the problem of finding bm ðBÞ; bm ðBÞ ¼ bm;0 þ
Rm 1 k k
k¼1 2 bm;k ðB þ F Þ, such that
Z p
1
dða; bm Þ ¼ jaðeÿiw Þ ÿ bm ðeÿiw Þj2 dw ð3:2Þ
p 0

is minimal, subject to several constraints related to the seasonal adjustment

context. First, the resulting seasonal adjustment filter must locally preserve the
mean of the input series; that is, bm ð1Þ ¼ 1. Second, the power of the input series
at the seasonal frequencies 2p‘=12; ‘ ¼ 1; . . . ; 6, must cancel out. Thus
bm ðeÿi2p‘=12 Þ ¼ 0. Since cos kw; k ¼ 0; . . . ; 1 are linearly independent functions
(Priestley, 1981), the problem becomes

bmk
min R ðak ÿ bmk Þ2
;k¼0;...;m k¼0
ð3:3Þ

with respect to

m
C:1 R bmk ¼ 1
k¼0
m ÿ2k‘p

C:2 R bmk cos
k¼0 12 ¼ 0; ‘ ¼ 1; . . . ; 6

Lagrange operators give straightforward solutions to (3.3); see Appendix I. It

is worth noticing that since we want the variance of the observed series to be
split at every frequency into orthogonal contributions, the frequency transfer
function of bm ðBÞ should never exceed 1. We shall see in Section 4 that the
solution to (3.3) does not necessarily satisfy that property. We found that
imposing it as a constraint distorts very much the filters’ band-pass structure,
and hence we decided to not consider it (details are available on request).
Notice that while historical WK filters always have a frequency transfer
function into [0,1], X-11 historical adjustment filters can have gains higher than
1 (Bell and Monsell, 1992); this is another reason why no exact model-based
approximation to X-11 filters has ever been produced.
We have designed an estimation procedure for seasonally adjusted series
which respects any requisite about the length of revisions. Yet, how long
should revisions last? Revision-adverse statisticians would prefer to lower m as
much as possible, but, because controlling the length of the revision period
implies a loss of accuracy in the final estimator, we believe that it is important
to closely monitor that loss so as to avoid large deviations with respect to the
optimal unconstrained final estimator. In section 4, we review some tools that
are helpful in monitoring the loss in accuracy and the convergence of
estimates.

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 199
4. ESTIMATION ERRORS

The classical analysis of revisions has been developed by Pierce (1980). We briefly
review it here, concentrating on preliminary estimates computed close to the end
of the sample and involving model-based forecasts of the unknowns. Let ^ntjtþk
denote the preliminary estimate of nt computed at time t þ k; k  0. Assuming
that Xtþk ¼ fx1 ; . . . ; xtþk g is available, then ^
ntjtþk ¼ Eð^nt jXtþk Þ. Let
nðBÞ ¼


þ nÿn Bn þ


þ n0 þ n1 F þ


þ nm F m þ



denote the polynomial which relates the estimator (2.4) to the innovations
at : ^nt ¼ nðBÞat . That polynomial is such that
r2 SðBÞnðBÞ ¼ hðBÞmn ðBÞ
Given (2.4), the weights nk verify
r2 hðF ÞnðBÞ ¼ Vn hn ðBÞhn ðF ÞSðF Þ ð4:1Þ
The invertibility of hðF Þ implies that nðBÞ converges in F . Like for inverted
moving average processes, the forward weights verify
1
lim nk ¼ 0
k!1
and lim
k!1
R n2j < 1
j¼kþ1

See also Maravall (1994). The revisions in the preliminary estimator of nt

computed at time t þ k are then
1
nt ÿ ^
^ ntjtþk ¼ R ni atþi
i¼kþ1
ð4:2Þ

with variance
1
nt ÿ ^
V ½^ ntjtþk Š ¼ R n2i
i¼kþ1
ð4:3Þ

Another tool useful for the monitoring of revisions is given by the theoretical
convergence path. After a number k of additional observations, the convergence
path of the preliminary estimates can be evaluated using
V ½^
ntjtþk ÿ ^ntjt Š
RCðkÞ ¼ 100 
V ½^nt ÿ ^ntjt Š
k ð4:4Þ
R
¼ 100  i¼1
n2i
1 2
Ri¼1 ni
Given an ARIMA model and its optimal decomposition, expression (4.3) gives
the theoretical revision variance, allowing inference to be made, while (4.4) helps
in anticipating the convergence delay.
Geweke (1978) and Pierce (1980) showed that, given any filter, extending the
series with MMSE forecasts minimizes the total revision error in preliminary

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200 C. PLANAS AND R. DEPOUTOT

estimates. Hence, when bm ðBÞ is used, the m forecasts needed for concurrent
estimation can be derived from the observed series model. The resulting revisions
can be analysed like previously, the ni weights being derived from the equality
r2 SðBÞnðBÞ ¼ hðBÞbm ðBÞ
Because bm ðBÞ embodies a finite number of weights, the nðBÞ’s forward part is
finite as well and the conditions
1
lim nk ¼ 0
k!1
and lim
k!1
R n2j < 1
j¼kþ1

are verified. The quantities (4.3) and (4.4) involving either mn ðBÞ or bm ðBÞ can thus
be easily derived from any ARIMA model. Empirical estimates will be given in
the application. Notice that, since the WK filter gives the expectation of the
unobserved component conditional on the sample available, on the model selected
and, in particular on the model parameters, the expressions (4.3) or (4.4) and their
empirical counterparts cannot take into account the error in the model parameters
estimates.
After convergence, the signal extraction procedure still yields an estimation
error, called final estimation error and defined as et ¼ nt ÿ ^nt . First, assuming
observed series stationarity, a frequency domain expression for the variance of the
final error in an estimator ^ nt ¼ cðBÞxt is given by
Z p
1
V ½nt ÿ ^
nt Š ¼ gn ðeÿiw Þ½1 ÿ cðeÿiw ފ2 þ gs ðeÿiw Þcðeÿiw Þ2 dw ð4:5Þ
p 0
where gs ðeÿiw Þ and gn ðeÿiw Þ are the spectra of the seasonal and nonseasonal
components. When cðBÞ is the WK filter (2.4), the variance of the final estimation
error turns out to be the variance of the ARMA process
hðBÞzt ¼ hn ðBÞhs ðBÞbt ð4:6Þ
with V ðbt Þ ¼ Vs Vn (Maravall, 1996). Bell’s (1984) assumption A implies that (4.6)
is still valid in the nonstationary case so that the final estimation error remains
finite. When bm ðBÞ is used, the symmetry of bm ðBÞ and the constraint C1 imply
that ½1 ÿ bm ðBފ has at least two unit roots at the zero frequency; similarly, C2
implies that bm ðBÞ has at least two unit roots at the seasonal frequencies. For the
airline model, these properties are sufficient to ensure that the integral (4.5) is well
defined and that the final estimation error obtained with constrained filters is still
finite.

5. CONTROLLING THE REVISION PERIOD: AN APPLICATION

We apply the finite approximation procedure to the ARIMA-model-based

decomposition of the French total production (FRTP) series. Our objective is to

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 201

FIGURE 2. Series FRTP (in logs)

illustrate how the convergence of the concurrent seasonally adjusted series

towards the historical figure can be controlled, under a close monitoring of the
deviations from the unconstrained estimator. The FRTP series comprises 162
observations recorded between 1985-1 and 1998-6. It is plotted in Figure 2 (in
logs), where it can be seen that it displays a somewhat unstable seasonal pattern,
the seasonal dips related to August decreasing in the last third of the sample.
Fitting the airline model to the log-transformed series, maximum likelihood
estimation yields
rr12 xt ¼ ð1 ÿ 0:62BÞð1 ÿ 0:28B12 Þat ð5:1Þ
ð0:09Þ ð0:12Þ
with residual standard deviation Va0:5 ¼ 0:016. Portmanteau correlation tests do
not show any significant departure of the residuals properties from the white noise
hypothesis: the Ljung–Box on the first 24 lags and the Box–Pierce tests on the first
two seasonal lags take the values Q24 ¼ 24:92 and Qs2 ¼ 1:23 (Ljung and Box,
1978; Pierce, 1978). The third and fourth moments of the residuals seem in
agreement with those of the normal distribution: the skewness and kurtosis
statistics take values of 0.38 (0.29) and 3.52 (0.59). A further check of residual
independence was performed by computing the Ljung–Box statistics on 24 squared
residuals first autocorrelations (McLeod and Li, 1983): the result, Q24 ða2t Þ ¼ 10:43,
does not suggest a significative nonlinear structure in the residuals.
The canonical decomposition of (5.1) is obtained with the TRAMO-SEATS
program (Gómez and Maravall, 1996) as

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202 C. PLANAS AND R. DEPOUTOT

SðBÞst ¼ ð1 þ 0:85B þ 0:62B2 þ 0:35B3 þ 0:09B4 ÿ 0:13B5

ÿ 0:31B6 ÿ 0:43B7 ÿ 0:50B8 ÿ 0:52B9 ÿ 0:52B10 ÿ 0:51B11 Þast ð5:2Þ

r2 nt ¼ ð1 ÿ 1:55B þ 0:58B2 Þant ð5:3Þ

where Vs ¼ 0:14 and Vn ¼ 0:42 (in Va -units). Given the structure (5.2)–(5.3), the
unobservables can be estimated either with the T. Wilson algorithm (Burman,
1980) or with the fixed interval smoother (Harvey, 1989), once the model is cast
into a state–space format. The equivalence of both approaches is shown in Gómez
(1999).
According to the model-based measure (4.3), the variance of the total
revisions on concurrent estimates is 0.107, so that 95% of the total revisions
recorded will belong to ½ÿ0:64; 0:64Š  Va0:5 . We first consider the 12 concurrent
seasonally adjusted estimates in the year 1992 (t ¼ 85; . . . ; 96). These concurrent
estimates, ^ntjt , are computed by replacing all subsequent observations
xtþ1 ; xtþ2 ; . . . by their forecasts derived from (5.1). A series of preliminary
estimates ^ntjtþ1 ; ^ ntjtþ2 ; . . . ; is obtained for every month of the year 1992 by adding
one more observation to the information set. That last observation replaces its
forecast in the previous preliminary estimates and updates the forecast function.
Eventually, the final estimators, ^ ntj162 ; t ¼ 85; . . . ; 96, are available. Using the
fact that successive revisions are independent, as ^ntjtþkþi ÿ ^ntjtþkþiÿ1 ¼ nkþi a:tþkþi ,

FIGURE 3. Empirical variance of total revisions

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 203
the empirical variance of the total revisions in concurrent estimates is computed
like

RMi¼1 ð^ntjtþi ÿ ^ntjtþiÿ1 Þ2

V^ ½^
ntjtþM ÿ ^
ntjt Š ¼ ð5:4Þ
M
where M is the number of observations needed to reach the end of the sample, in
our case M ¼ 66; . . . ; 78: The results, shown in Figure 3, are in agreement with the
theoretical variance (4.3) of the total revision error, 0.107. The months with
largest revisions are December, May and October, with variance .26, .15 and .12,
respectively. We focus the analysis on these three months.
The convergence of the revisions in the concurrent estimates after m additional
observations is estimated by
m
c R ð^ntjtþi ÿ ^ntjtþiÿ1 Þ 2
RCðmÞ
RC ¼ 100  i¼1 ð5:5Þ
RMi¼1 ð^ntjtþi ÿ ^ntjtþiÿ1 Þ2
where t ¼ 85; . . . ; 96. For the three months of interest, Figure 4 displays the
convergence path of the empirical revisions in the concurrent estimates. The
theoretical path (4.4) is also displayed. It can be seen that observations occuring
12 and 24 months ahead are those implying the largest revisions. We consider the

FIGURE 4. FRTP rates of convergence of total revisions

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204 C. PLANAS AND R. DEPOUTOT

truncation lengths 36, 24 and 18; as we shall see, shorter lengths would not be
appropriate.
Applying (2.4) to model (5.1)–(5.3) yields the analytic expression of the WK
filter. The finite approximations are then computed using the results in Appendix
I; in particular, applying expression (7.1) to the coefficients mk of the WK filter
yields

b36;k ¼ mk ÿ 0:5ðÿ0:0008 þ 0:0011 cos kp=6 þ 0:0012 cos kp=3

þ 0:0013 cos kp=2 þ 0:0013 cos k2p=3 þ 0:0013 cos k5p=6 þ 0:0007 cos kpÞ

b24;k ¼ mk ÿ 0:5ðÿ0:0049 þ 0:0051 cos kp=6 þ 0:0060 cos kp=3

þ 0:0063 cos kp=2 þ 0:0064 cos k2p=3 þ 0:0065 cos k5p=6 þ 0:0033 cos kpÞ

b18;k ¼ mk ÿ 0:5ðÿ0:0043 þ 0:0268 cos kp=6 þ 0:0307 cos kp=3

þ 0:0270 cos kp=2 þ 0:0316 cos k2p=3 þ 0:0271 cos k5p=6 þ 0:0159 cos kpÞ

Figure 5a shows the resulting weights together with the original ones. No
striking discrepancy can be seen: the weights of the original filter are just corrected
so that the constraints C1 and C2 are verified for a given number of coefficients.
These corrections have, however, several consequences. First, the gains of the
approximated filters can be above 1; see Figure 5b. Second, as noticed by a
referee, some distortions can be seen in the range ð0; p=6Þ which can affect the
long-term behaviour of the seasonally adjusted series. Ideally, bm ðBÞ should be
subject to the constraint bm ðeÿiw Þ ¼ mn ðeÿiw Þ for every frequency in ð0; p=6Þ.
However, bm ðBÞ is already subject to seven constraints. We found that increasing
the number of constraints turns out to damage the filter band-pass structure: for
example, for m ¼ 18, imposing three further constraints within ð0; p=6Þ for a total
of ten constraints seriously affects the approximation, which is very distant from
the original infinite filter aðBÞ (see Appendix II). In consequence, we decided not
to impose additional constraints. The distortions within ð0; p=6Þ can be seen as a
price to pay for controlling the duration of revisions. As any drawback, it is
important to monitor them so as to check that the output series is not excessively
affected. Since the frequency range ð0; p=6Þ is related to the long-term behaviour
of the series, we suggest to perform that check by scrutinizing trends extracted
from the different outputs. In the case of the distortions being found to be too
important, we advise users to increase m, the duration of revisions considered
when approximating the infinite filter.
Figure 6 show the seasonally adjusted series obtained with bm ðBÞ; m ¼ 24; 18;
together with the WK estimator. The adjustment obtained with m ¼ 36 is not
plotted because it is indistinguishable from the unconstrained one. The
convergence of the preliminary figures is now completely under control: the
estimators become final as, respectively, 36, 24, and 18 observations are added.
Small discrepancies are visible with m ¼ 24; they become slightly more
important with m ¼ 18. The concurrent estimates at the sample end are
computed with respectively 36, 24 and 18 forecasts obtained from the observed

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 205

FIGURE 5. FRTP Seasonal Adjustment Filters- (a) weights and (b) frequency transfer function

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206 C. PLANAS AND R. DEPOUTOT

FIGURE 6. FRTP seasonally adjusted series: (a) m ¼ 24 and (b) m ¼ 18

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 207

FIGURE 7. Long-term component in seasonally adjusted series: Hodrick–Prescott trends ðk ¼ 1600Þ

series model (5.1). Notice that the differences between the seasonal adjustments
cannot be described as a white noise process: the ratio of the difference between
the frequency transfer functions of the unconstrained and approximated filters
to the series spectrum would have to be constant over ½0; pŠ, a condition that, in
general, will not be met.
Figure 7 shows trends extracted from the seasonally adjusted series obtained
with the unconstrained filter and with the three approximations, m ¼ 36; 24; 18.
These long-term trends are outputs of the Hodrick–Prescott filter (Hodrick and
Prescott, 1997) with signal to noise ratio set to 1/1600, mainly to have a large
enough low-pass band. As can be seen in Figure 7, the four trends are
indistinguishable: the discrepancies are less than 10ÿ3 in absolute value. Hence,
in that example, the distortions seen in the filters gain over the frequency range
ð0; p=6Þ do not affect the long-term movements.
Table II displays the distance between WK and the truncated filters, the final
estimation error variance (4.5) and the theoretical revision variance (4.3). It is
seen that dðmn ; bm Þ lies between 10ÿ4 for m ¼ 36 and 0.0172 for m ¼ 18, and that
the truncation increases the final estimation error variance by 2% with m ¼ 36
and by 10% with m ¼ 18. The effect on the theoretical size of total revisions is
less clear, since they can be either amplified to 0.131 with m ¼ 24 instead of
0.107, or reduced to 0.101 with m ¼ 18; that is because our procedure focuses on
the convergence period, not on the revision size. Figure 3 shows that for the
months of year 1992, shorter filters do not amplify the revisions actually
recorded.

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208 C. PLANAS AND R. DEPOUTOT

TABLE II
FINITE APPROXIMATION VS WK ESTIMATOR
FILTER DISTANCE AND MODEL-BASED VARIANCE OF ESTIMATION ERRORS

FRTP
Filter dðbm ; mn Þ V ½nt ÿ ^
nt Š V ½^
nt ÿ ^
ntjt Š
WK – 0.111 0.107
m = 36 0.0001 0.113 0.115
m = 24 0.0013 0.116 0.131
m = 18 0.0172 0.124 0.101

TABLE III
ACCEPTABLE DURATION OF REVISION PERIOD IN AIRLINE MODEL

h12
h1 0.8 0.6 0.4 0.2
0.8 m1 ¼ 72 m1 ¼ 36 m1 ¼ 24 m1 ¼ 12
m2 ¼ 84 m2 ¼ 48 m2 ¼ 24 m2 ¼ 24
0.6 m1 ¼ 72 m1 ¼ 36 m1 ¼ 24 m1 ¼ 15
m2 ¼ 84 m2 ¼ 48 m2 ¼ 28 m2 ¼ 24
0.4 m1 ¼ 72 m1 ¼ 36 m1 ¼ 24 m1 ¼ 15
m2 ¼ 84 m2 ¼ 48 m2 ¼ 28 m2 ¼ 24
0.2 m1 ¼ 72 m1 ¼ 36 m1 ¼ 24 m1 ¼ 13
m2 ¼ 84 m2 ¼ 48 m2 ¼ 27 m2 ¼ 24
m1 = minimum m-value such dðbm ; mn Þ < 0:01
m2 = minimum m-value such dðbm ; mn Þ < 0:005

In this example, the truncation point m ¼ 18 seems too high: it leads to a

constrained filter which is a bit too far away from WK, a final estimation error
too high relatively to the minimum, and, as a consequence, the seasonally
adjusted series with b18 ðBÞ is too much different from the unconstrained
seasonally adjusted series. The length m ¼ 24 yields a much more acceptable
result.
In general, acceptable cutting points depend on the stochastic properties of the
series. This example suggest a reasonable maximum filter distance of about 0.01
and a reasonable maximum loss in accuracy of order 20% with respect to the
accuracy of the WK final estimator. Notice, however, that if we use V ½nt ÿ n^t Š to
build a 5% confidence interval around the WK final estimator n^t , then, for this
example, the discrepancies observed when the WK filter is approximated by
shorter ones are never significant.
For different values of the parameters ðh1 ; h12 Þ in the airline model (2.1),
Table III reports acceptable length for the revision periods . The lengths reported
are the minimum ones which let the distance dðbm ; mn Þ be less than 0.01 and less
than 0.005; they are respectively denoted m1 and m2 . These distances are roughly
of same order than the minimum distances reported in Table I between X-11 and
airline model based filters.

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 209
Table III shows that, in the airline model, acceptable duration lengths of the
revision period are related to the value of h12 : the larger its value, the longer
the revision period. This result is natural since, as can be seen in (2.4), the
convergence of the WK filter depends on the inverse of the moving average
polynomial. For intermediate values for h12 , three years of revisions are an
acceptable truncation level if h12 ’ 0:6, two years if h12  0:4: If, for some
reason, the approximation is to be more accurate at 0.005, then respectively four
and three years should be used instead. When h12 is close to 1, the seasonal
component has a close to deterministic behaviour and the truncation level must
be large: the filter must cover six years for a reasonable approximation.
Truncating at three years, for example, would involve an approximated filter
with distance around 0.04. So many years can be seen as excessive; yet it is true
that while being long-lasting, revisions in the estimation of close to deterministic
seasonal behaviours are typically of small magnitude.
These guidelines are given on the basis of the airline model. As the convergence
of the WK filter depends on the inverse of the seasonal moving average factor
ð1 ÿ h12 B12 Þ, they can be considered for the decomposition of all models
embodying that factor, that is for most of seasonal models.

6. FINITE FILTERS AND MODEL-BASED APPROXIMATIONS TO X-11 FILTERS

The problem of giving a signal extraction interpretation to X-11 filters has been
the subject of debate in the statistical literature. For instance, Burridge and
Wallis (1984) derived ARIMA models for unobserved components leading to a
seasonal adjustment signal extraction filter very close to the X-11 default
adjustment filter. That X-11 default is the one obtained by convoluting 3  3
and 3  5 seasonal moving average with the 13-term Henderson moving
average. In this section, we show that the X-11 default filter is actually closer
to some finite approximations of the unconstrained WK filter. Regarding
historical estimation, the model specification proposed by Burridge and Wallis
(1984) was

ð1 þ B þ


þ B11 Þst ¼ ð1 þ 0:71B12 þ B24 Þast

r2 nt ¼ ð1 ÿ 1:59B þ 0:86B2 Þant ð6:1Þ

Vs =Vn ¼ 0:017

Denoting mX ðBÞ the X-11 default adjustment filter, this decomposition leads to
the distance dðmn ; mx Þ ¼ 0:0036, which was a minimum in Burridge and
Wallis’ model specification search. Using (6.1) and (7.1), we computed for
m ¼ 24; . . . ; 100 the filters bm ðBÞ as optimal approximations to mn ðBÞ according to

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210 C. PLANAS AND R. DEPOUTOT

FIGURE 8. Frequency transfer function of seasonal adjustment filter

(3.3). For every m value, we checked the distance between bm ðBÞ and mX ðBÞ and
the ratio rm defined as
dðbm ; mX Þ
rm ¼ 100  ð6:2Þ
dðmn ; mX Þ
We found that an improvement of order 40% in the approximation of the
X-11 default filter can be obtained by truncating the WK filter at length
m ¼ 43, with a final distance at dðb43 ; mX Þ ¼ 0:0023. Figure 8 shows that this
improvement is related to the capacity of truncated filters to have gains higher
than 1.

7. CONCLUSION

In this paper, we have built finite approximations to infinite filters and we have
applied them to the control of the revision period in the seasonal adjustment
problem. These approximations are obtained via simple corrections to the original
signal extraction filters that are given in Appendix I. Our procedure enables
statisticians to produce seasonally adjusted series not subject to revisions after a
given number of additional observations. However, as truncating filters implies

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 CONTROLLING REVISIONS IN ARIMA-MODEL-BASED SEASONAL ADJUSTMENT 211
that the estimators eventually obtained deviate from the optimal WK ones, there
is a trade-off between closeness to the unconstrained estimator and the
convergence time of the modified estimate: the shorter the revision period, the
more distorted the estimate. As illustrated in the application, it is important to
monitor these distortions closely and to consider a truncation level which keeps
them reasonably low. We provide guidelines for selecting reasonable truncation
levels. They were obtained on the basis of the airline model, but they can be
considered for the fairly general case of models embodying the moving average
factor ð1 ÿ h12 B12 Þ.
We also have shown that X-11 filters are better approximated by signal
extraction filters with length constraints than by infinite ones. In particular, the
Burridge and Wallis’ approximation could be improved. Although not
reproduced, we have checked that this property is valid for every X-11 filter
approximation based on the airline model. This opens a new avenue for finding
out accurate model-based interpretations of X-11 decompositions. Besides the
fundamental interest, this would simplify the comparison between X-11 and
ARIMA-model-based seasonal adjustment methods and eventually facilitate
model-based inference in X-11.

APPENDIX I. SOLUTION TO (3.3)

m
Let us denote QðbÞ ¼ Rk¼0 ðak ÿ bk Þ2 , wk‘ ¼ cos 2p‘k=12, and LðbÞ the expression defined
by
m  6 m
LðbÞ ¼ QðbÞ þ k R bk ÿ 1 þ R l‘ R bk wk‘
k¼0 ‘¼1 k¼0

where k and l‘ ; ‘ ¼ 1; . . . ; 6 are the usual Lagrange operators. The solution, b , is such that
6
dLðb Þ
¼ ÿ2ðak ÿ bk Þ þ k þ R l‘ wk‘ ¼ 0
dbk ‘¼1

m
dLðb Þ
¼ R bk ÿ 1 ¼ 0
dk k¼0

m
dLðb Þ
¼ R bk wk‘ ¼ 0 ‘ ¼ 1; . . . ; 6
dl‘ k¼0

The operators k; l‘ ; ‘ ¼ 1; . . . ; 6 can be derived by solving the system of seven equations

yielded by Rm  m 
k¼0 dLðb Þ=dbk ¼ 0 and Rk¼0 wk‘ dLðb Þ=dbk ¼ 0; ‘ ¼ 1; . . . ; 6; making use of the
derivatives above. Inserting the solutions in
!
6
bk ¼ ak ÿ 12 k þ R l‘ wk‘
‘¼1
ð7:1Þ

m
gives the coefficients of the frequency transfer function bm ðeÿiw Þ ¼ Rk¼0 bk cos kw which
solves (3.3).

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212 C. PLANAS AND R. DEPOUTOT

APPENDIX II. IMPOSING FURTHER CONSTRAINTS TO

THE APPROXIMATIONS

Let us consider b18 ðBÞ, the approximation with 18 coefficients of the infinite WK filter
related to models (5.1)–(5.3). That approximation is subject to the seven constraints
implied by C1 and C2 (see (3.3)), and its distance to the unconstrained filter is
dðmn ; b18 Þ ¼ 0:0172: Let us now impose three more constraints at the frequencies
w ¼ 2kp=ð4  12Þ; k ¼ 1; 2; 3; all within ½0; p=6Š: The 18 coefficients of b18 ðBÞ are now
subject to ten linear constraints. The distance to the original filter becomes
dðmn ; b18 Þ ¼ 0:0397, i.e. more than twice the distance obtained when only C1 and C2 were
considered. A check of the frequency transfer function would show that the resulting
approximation is, as expected, very satisfactory within ð0; p=6Þ, but it suffers of strong
distortions at the other frequencies that make it no longer suitable for seasonal adjustment.
Clearly, the more constraints, the larger the deviation from the original filter and the less
satisfying the decomposition is.

ACKNOWLEDGEMENTS

This paper was written within the framework of a study on Seasonal Adjustment
methods, conducted for EUROSTAT (contract nr. 8221011/6 to the first author)
while the second author was in detachment at EUROSTAT. The ideas expressed
here are those of the authors and do not necessarily reflect the positions of
EUROSTAT and of the JRC. Thanks are due to the Members of EUROSTAT’s
internal task-force on seasonal adjustment for their remarks and suggestions, and
to an anonymous referee for very useful comments that have substantially
improved the paper.

NOTES

Christophe Planas Institute for Systems, Informatics and Safety, Joint Research
Centre of European Commission, TP361, Via E. Fermi, 1, I-21020 Ispra, Italy,
email: christophe.planas@jrc.it. Please send correspondence to first author.
Raoul Depoutot raoul.depoutot@insee.fr, INSEE, France.

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