Transcript Pioneer Investments Presentation Template

Towards longer national account data time series in
UK
Joint project of the OECD, bank of England and National
Statistics
Author | Month 2006
Introduction
The aim of this project is to fill a gap in the Financial Accounts time
series in order to help both practitioners and academics to better
understand current trends
For the United-Kingdom, the current data, as transmitted to the OECD, cover
the period 1987-2006.
Information on balance sheet figures by sector exists in the annual national
accounts (Blue Book) publications and is available for 1975 to 1986.
Total financial assets and liabilities are given, but the instrument breakdowns
are very different compared with the new SNA 93 classification
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Previous work
 Pioneering work on balance sheets in UK, undertaken by the department of
applied Economics, Cambridge (DAE) was presented in a book written by
Professor Jack Revell.
 That work was later extended by Revell and Roe, with CSO and Bank of
England sponsorship, to include annual estimates for the period 1957-1966
and a summary was published in economic trends in 1971.
 Provisional balance sheet estimates for the personal sector for 1966 to
1975 were published by the CSO in January 1978.
 Information on balance sheet figures by sector exists in the annual national
accounts (Blue Book) publications and is available for 1975 to 1986.
 The current data with the SNA93 classification cover the period 1987 to
2006
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Summary: available financial account data for the all sectors
Period
Sources
From 1957 to 1966
National balance sheets and national
accounting – Revell and Roe
From 1966 to 1976
CSO, economic trends for Personal sector
For 1966, 1972
CSO, Economic trends, 1980 all sectors
From 1975 to 1987
Blue book from 1987 to 1997
From 1987 to 2006
OECD.stat / National statistics
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Reasons for the discrepancy between the two sources:
 Classification of institutional sectors and financial instruments
– Changes in the definitions of institutional sectors
• The definition of the UK no longer includes the Channel islands or the Isle of Man
• The household sector is similar to, but not the same as, the old personal sector. Sole
traders as unincorporated businesses continue to be recorded here since their
accounts are not separable from those of households. Partnerships are now
classified to non-financial corporations (S11) or financial corporations(S12).Life
insurance assurance and pension funds’ income and expenditure were previously
recorded in the personal sector. They are now recorded with Insurance corporations
and pension funds’ sub-sector (S125)
• The bank of England is included in the sub-sector S121 of the general sector
financial corporations
– A changes in the definition of instruments
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From the old classification to the SNA 93
The main changes within
SNA 93 refer
to the definition of
institutional sectors
…..
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From the old classification to the SNA 93
…and to the
classification
of financial instruments
We used this
conversion table in
order to merge data
from the two time
series.
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UK – Personal sector from 1979 to 2006
4000
Assets
Total Financial Assets (old
Classification)
3200
2400
Total Financial Assets
(New Classification)
1600
800
0
1979
1800
1984
1989
1994
1999
2004
Total Financial
Liabilities (old Class)
Liabilities
There is an evident
good
degree
of
continuity between
the old series and the
New time series in
the case of both
assets and liabilities
and in relation of the
single instruments.
1200
Total Financial
Liabilities (New
Class)
600
0
1979
1984
1989
1994
1999
2004
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Longer time series allow to have a better insight on wealth …
Financial asset as a Percentage of GDP increased in the period under review but
not uniformly …
350%
Assets in % of
GDP
280%
210%
Liabilities as a
% of GDP
140%
70%
20
06
19
98
19
90
19
87
19
82
19
78
19
72
19
66
19
63
19
57
0%
We can identify three main periods:
In the first 20 years we witnessed a stable trend in the ratio of financial assets as a percentage of GDP
with an average of about 200%
In the second period, from 1972 to 1979, we witnessed an impressive increase in nominal GDP no
followed by an increase of household financial assets. The ratio reached the lowest level of 122% in
1979
Starting from the 80’s the ratio have been increasing impressively, with the only exception of 2001
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…its dynamics within the economy and its allocation
Important changes both in per capita terms …
Assets in per capita
terms
60000
40000
Liabilities in per capita
terms
20000
20
06
19
98
19
90
19
87
19
82
19
78
19
72
19
66
19
63
19
57
0
100%
… and in the asset mix
80%
Others
Life insurance and pension funds
60%
Share and other equity
40%
Securities other then shares
20%
Currency and deposits
0%
1957 1963 1966 1972 1978 1982 1987 1990 1998 2006
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Strong disparities across countries, each of them shows a specific
profile
Despite the common trend towards a decrease in safe assets and the switch towards
managed and long term assets there are important structural differences among the
countries under analysis.
 UK presents a high level of long term investment (Life insurance and Pension)
 USA is characterised by the importance of direct investments in shares and other equity
 safe instruments are still around 40 per cent of the household financial wealth in Italy. As
expected, in the US and UK safe assets are less important.
 Italians stand out because of the importance of fixed income securities and because of a
share of long term products still well below average
Source: PGAM estimation on Central Bank data
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Opportunities arising from the analysis of longer time series:
 Longer time series give the opportunity to better analyse many relevant
issues such as:
– The evolution of the financial structures over the time
– The evolution in the liabilities side of non-financial corporation
– Correlations between economic cycles and financial cycles
– Convergence in the financial structures between European countries, Japan,
US and Canada
– Measures of wealth effects
– Models on the demand of financial assets
– Measures of the degree of openness of the different financial markets
– The evolution and relative importance of financial institutions
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Summary: available national account data
Countries
Period
Sources
 ITALY
from 1950 to 2006
Bank of Italy
 US
from 1950 to 2006
Federal reserve
 CANADA
from 1960 to 2006
OECD stat
 GERMANY
from 1970 to 2006
OECD.stat/ golden book
 SPAIN
from 1980 to 2006
OECD.stat/ golden book
 UK
from 1979 to 2006
Bank of England / CSO
 FRANCE
from 1980 to 2006
OECD.stat
 JAPAN
from 1980 to 2006
OECD.stat
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Conclusions
 The aim of this project is to fill a gap in the Financial Accounts time series in
order to help both practitioners and academics to better understand current
trends.
 I would like to express on behalf of the research team our warmest thanks to
those who have helped us so far and in particular
– Mick Tucker of UK National Statistics Office for data support
– Stuart Brown and Michael Rizzo of UK National Statistics Office
– Chris Wright and to Stephen Sabine of Bank of England
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