Interpolating poverty statistics in the Philippines for non-FIES years using DFM

Abstract

The establishment of the Sustainable Development Goals in 2015 entails generating relevant and timely statistics for monitoring and policymaking. The Philippine Statistics Authority (PSA) generates poverty statistics using the Family Income and Expenditure Survey (FIES). However, due to certain limitations, the FIES collection and calculation of official poverty statistics is done only every three years. In this regard, this paper presents a method of filling in the gaps by interpolating annual poverty statistics, particularly the poverty incidence, using macroeconomic indicators and demographic and employment information from the Labor Force Survey (LFS). These explanatory variables were related to the poverty incidence using the Dynamic Factor Model (DFM) in the state-space form to produce estimates for years when poverty statistics are not available. Relatively high forecast accuracy was observed for the predicted values of poverty incidence.