Transcript Lesson 2 - Moodlerooms

Introduction to the System of
National Accounts (SNA)
Lesson 2
a) GDP, GNI etc.
b) International Comparison Program
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1
Terms used in the National Accounts
• Terminology:
– Domestic and national
– Net and gross
– Stocks
• GDP, GNP, GNI, NDP, etc
• Depreciation
• Informal …
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2
GDP
• GDP = Gross Domestic Product
• GDP(P) = Gross output of enterprises,
government and NPISH minus intermediate
consumption
• GDP(E) = Consumption expenditure, capital
formation and net exports
• It is “Gross” because Consumption of Fixed
Capital (CFC) has not been deducted.
• It is “Domestic” because it refers to production
that takes place in the “domestic territory” of a
country.
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3
GNI
• GNI is Gross National Income
• GNI = GDP plus interest, dividends and wages
and salaries from abroad, minus these same
items transferred to non residents
• GNI is that part of GDP that is received by
residents of the “nation”.
• GNI used to be called GNP (Gross National
Product). P was changed to I in the 1993 SNA.
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4
NDP, NNI
• If CFC is subtracted from GDP or GNI they become,
respectively, Net Domestic Product and Net National
Income
• NNI used to be called “National Income” but that
term is not used in the SNA.
• CFC is the decline in the current market price of fixed
assets due to wear and tear, and obsolescence.
• National accountants say consumption of fixed assets
but another term often used is “depreciation”
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5
Consumption of Fixed Capital/
Depreciation
• CFC is a cost of production.
• Capital assets wear out and have to be replaced.
CFC is the “using up” of capital assets.
• It should be deducted from Gross Output just like
any other item of intermediate consumption.
• BUT – CFC cannot be observed and it is difficult to
measure it accurately.
• For that reason most people prefer to use GDP or
GNI
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Disposable Income
• For households “Disposable income” is all wages
and salaries, net property income received, plus
net current transfers received.
• It is the amount of money that households can
dispose of as they wish - spend or save.
• For the nation, disposable income is GNI or NNI
plus net current transfers received. It is also equal
to consumption expenditure plus saving.
• It is referred to as “Disposable Income, gross” or
“Disposable Income, net” depending on whether
CFC is included.
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Net and net: Stocks and stocks
• Net and net
– Sometimes “net” means
after deducting CFC
• NDP, NNI and NDI for
example.
– Sometimes “net” means
after deducting a flow in
the opposite direction
• Net transfers received,
net exports, net property
income received…are
examples
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• Stocks and stocks
– In the SNA we
distinguish between
stocks and flows
– But stocks can also mean
inventories
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Informal…
• Terms like «informal», «hidden», «nonobserved» refer to economic activities carried
out by unincorporated household enterprises.
• Informal, hidden, non-observed activities
must be included in GDP but they are often
hard to measure.
• There is no «informal sector» in the SNA.
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9
The International Comparison
Program (ICP)
• The purpose of the ICP is to enable countries to
make real (or “volume”) comparisons of GDP
between countries.
• The ICP does this by calculating Purchasing Power
Parities or PPPs.
• To compare real GDP between years in a single
country, we revalue each year’s GDP using the
constant prices of a base year.
• To compare real GDP between countries for a single
year, we revalue each country’s GDP using PPPs.
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10
What is a PPP?
• An I-Phone costs 320 Euros in Spain and 512 Dollars in
the United States.
• The “I-Phone PPP” (with Spain as base country) is
512/320 = 1.60
• The ICP calculates an I-Phone PPP for every country
where I-Phones are sold. But it also calculates PPPs for
over 1000 other goods and services.
• The average of those 1000 or more PPPs is the GDP
PPP.
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11
GDP per capita 2005
Botswana
Mauritius
Namibia
Swaziland
Sudan
Nigeria
Lesotho
Kenya
Ghana
Zambia
Tanzania
Uganda
Sierra Leone
Mozambique
Gambia, The
Malawi
Liberia
0
2,000
4,000
6,000
PC GDP Exchange Rates
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8,000
10,000
12,000
14,000
Per capita GDP PPP
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Some complications
• Making price comparison between Spain and the
United States is rather simple. But how do we
make a “multilateral” comparison for 160+
countries?
• When we have made several price comparisons,
how do we combine them - the I-phone PPP, the
McDonalds cheeseburger PPP, the kilo of brown
rice PPP, …..?
• What do we do if there are no I-phones on sale in
some countries?
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13
Structure of the ICP Classification
Categories
Groups
Classes
Basic
Headings
13
43
90
110
1
1
1
1
5
7
16
21
1
1
5
5
15.00 Gross fixed capital formation
3
6
11
12
16.00 Change in inventories and acquisitions
less disposals of valuables
2
2
2
4
17.00 Balance of exports and imports
1
1
1
2
26
61
126
155
Main Aggregates
11.00 Individual consumption expenditure by
households
12.00 Individual consumption expenditure by
NPISHs
13.00 Individual consumption expenditure by
government
14.00 Collective consumption expenditure by
government
GDP
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Basic Headings
Food example
Code
Level
INDIVIDUAL CONSUMPTION EXPENDITURE BY HOUSEHOILDS
11.00.000.0
11.01.00.0
11.01.10.0
11.01.11.0
FOOD AND NON-ALCOHOLIC BEVERAGES
FOOD
Bread and cereals
Main aggregate
Category
Group
Class
11.01.11.1
Rice
Basic heading
11.01.11.2
Other cereals, flour and other cereal products
Basic heading
11.01.11.3
Bread
Basic heading
11.01.11.4
Other bakery products
Basic heading
11.01.11.5
Pasta products
Basic heading
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Basic Headings
Machinery example
15.00.00.0
GROSS FIXED CAPITAL FORMATION
15.01.00.0
MACHINERY AND EQUIPMENT
15.01.10.0
METAL PRODUCTS AND EQUIPMENT
Main aggregate
Category
Group
15.01.11.1
Fabricated metal products, except machinery and
equipment
Basic heading
15.01.12.1
General purpose machinery
Basic heading
15.01.13.1
Special purpose machinery
Basic heading
15.01.14.1
Electrical and optical equipment
Basic heading
15.01.15.1
Other manufactured goods
Basic heading
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Data sources to break GDP into 155
Basic Headings
•
•
•
•
•
•
•
Budget expenditure survey
Nutrition surveys
Living standards measurement survey
FAO Food Balances
Import statistics
Retail sales surveys
Production statistics
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Methods for filling gaps
1.
Data sources that are not usually used for national accounts
2.
Expenditure data from a previous year
3.
Expert estimate
4.
Expenditure weights from a neighbouring or similar country
5.
Equal distribution
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How BH expenditures are used to
calculate PPPs
• “Garments” is a Basic Heading under Household
Consumption Expenditure. It includes “garments for men,
women and children either ready to wear or made-tomeasure.”
• The PPP for “Garments” is the simple geometric average of
PPPs for jeans, blouses, socks, tee-shirts etc.
• The PPP for “Clothing” is the weighted average of the PPPs
for the three BHs -Garments, Clothing materials, and
Cleaning and repair of clothing. Expenditure shares are
used as weights to get the PPP for “Clothing”.
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What have we learned about the ICP.
• It’s purpose is to compare GDP between
countries.
• To do this we calculate PPP exchange rates.
• Both national accountants and price statisticians
are involved in the program:
– National accountants estimate expenditures for 155
categories of GDP(E)
– The price statisticians collect prices for the goods and
services commonly bought in each country.
• The World Bank uses these data to compile PPPs
for over 160 countries.
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