Abstract
“At this point, it might be useful for us to recognize again the difference between risk and uncertainty. With risk, as we know, one can assign probabilities to the list of outcomes and act appropriately given the distribution. With uncertainty, it is difficult to assign probabilities to outcomes...Today we are operating in a world of increased uncertainty”. (Anthony M. Santomero, Member of Federal Open Market Committee) Reliable data is a must ingredient for policy-making. However, policymakers face a dilemma when the data is subject to a number of revisions and has low frequency. Relying on uncertain data often leads to unreliable forecasting, policy assessment and recommendations. In short, data uncertainty impacts the power, validity and effectiveness of policy decisions. Data uncertainty is common in both developed and developing economies; however the severity is greater for developing economies. For instance, in Pakistan the main dataset of National Income Accounts is released once in a year. Major macroeconomic decisions and targets are formulated on the basis of this data. However, this information itself is subject to frequent revisions.