Transcript Quarterly national accounts and seasonal adjustment

Introduction to the SNA, advanced
Lesson 7
Rest of the world
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1
Background
• We have already examined the five institutional sectors for
residents
• Another sector that can be thought of as a sixth institutional
sector is the “Rest of the World” (or “RoW”)
– it is the national accounts equivalent of the balance of payments
• The ROW sector is included in the national accounts to
identify transactions between a country’s residents and the
rest of the world
– it completes the national accounts by providing the link between the
domestic economy and other countries
– it is presented from the point of view of the rest of the world, which is
the opposite view to that in the BPM
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RoW sector in the national accounts
• The balance of payments (BoP) defines a series of accounts
that all relate to resident/non-resident transactions
– they cover current transactions, capital transactions and balance
sheets
• The SNA defines a number of integrated accounts, all of which
should be compiled at the national level
– they can also be produced for each of the five domestic sectors and
the RoW sector
– however, the SNA’s integrated accounts are broader than the BoP and
so the RoW does not have entries against all the data items that are
applicable to the five domestic sectors
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3
Exports and imports of goods
• Exports are the goods or services whose
economic ownership is changed between a
resident and a non-resident, usually by sale
but also through gifts or barter
• Conversely, imports are the provision of goods
or services by non-residents to residents
• Traditionally, the data sources for exports and
imports of goods have been the Customs
recording systems
– developments in the past decade or so may result
in some important categories of goods slipping
through this method of recording
– illegal imports or exports also slip through this
recording net
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Goods – classification
• Exports and imports of goods are classified in accordance with
the Standard International Trade Classification (SITC)
• The highest level of the SITC is the 10 “Sections”, as follows:
Section 0 - Food and live animals
Section 1 -Beverages and tobacco
Section 2 – Crude materials, inedible, except fuels
Section 3 - Mineral fuels, lubricants and related materials
Section 4 - Animal and vegetable oils, fats and waxes
Section 5 - Chemicals and related products, n.e.s.
Section 6 - Manufactured goods classified chiefly by material
Section 7 - Machinery and transport equipment
Section 8 - Miscellaneous manufactured articles
Section 9 - Commodities and transactions n.e.c.
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Goods – valuation
• As is the case with the rest of the national accounts, the basic
principle is that the values in the RoW accounts should be
based on market prices
– exports and imports of goods provide a special case where the
preferred valuation is at the customs frontier of the exporting country
– it is referred to as “free-on-board” (f.o.b.) valuation
– in most countries it is possible to obtain exports f.o.b. directly from
Customs databases
– however in many countries details on imports are available only at the
value at which they reach the ports in the importing countries
– it is referred to as “imports c.i.f.” (i.e. cost, insurance and freight)
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Goods – time of recording
• As is the case through the domestic sectors, the principal of
accrual accounting applies in the RoW account
• Transactions should be recorded in the RoW account at the
time that ownership changes
• Balance of payments statistics are normally expressed in the
domestic currency
• Using Customs data as the basis for exports and imports of
goods can present difficulties for national accounts (or BoP)
compilers
– Customs data are often recorded on the date when the details were
recorded in the Customs system rather than when ownership actually
changed
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Exports and imports of services
• A clear distinction is made between goods and services in the
BoP because international treaties often consider them
separately
– data sources also have an impact because the information
for compiling trade in services are usually obtained by
surveys rather than from administrative records
• Unlike the production of goods, the production of a service is
generally linked to an arrangement between a particular
producer and a particular consumer
– as a result, international trade in services is closely linked
with the international production of services as the
production process involves a resident and a non-resident
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Services – classification
• The highest level of the IMF’s BoP services classification is:
Manufacturing services on physical inputs owned by others
Maintenance and repair services n.i.e.
Transport
Travel
Construction
Insurance and pension services
Financial services
Charges for the use of intellectual property n.i.e.
Telecommunications, computer and information services
Other business services
Personal, cultural and recreational services
Government goods and services n.i.e.
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Services – valuation
• The valuation principles for international trade in services are
the same as those the SNA describes for transactions in the
domestic economy
– consistent valuation is required between goods and services
– market values should be used for services
• In international transactions, an incentive often exists to
distort the price quoted in documents provided to Customs
authorities to reduce the taxes paid
• It can also be difficult to even identify that services have been
imported or exported because of the increasing use of
electronic delivery of services and obtaining a realistic value
for such services can be even more difficult
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Services – time of recording
• According to the SNA, services should be recorded at the time
when they are provided
• In theory, the service transaction should be recorded at the
same time by both parties to the transaction
• In practice, differences may arise in the time of recording by
the transactors in different countries
– it may be necessary to make timing adjustments if major
divergences are identified between the time a service was
provided and when it was recorded by the local (domestic
economy) transactor
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Residence
• The concept of residence is important in determining which
country an institutional unit should be classified to
• The key determinant of residence is the country in which the
producing unit is located for more than one year
–
–
–
–
–
land area
airspace
territorial waters
continental shelf
territorial enclaves elsewhere (e.g. embassies)
• The treatments recommended for a number of borderline
cases are described in detail in both the 2008 SNA and the
BPM6
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Structure of the RoW accounts
• The RoW “sector” potentially has entries in most of the
current accounts, the capital account, the revaluation
accounts and the balance sheets in the national accounts
• In the current accounts, the principle flows recorded relate to
transactions due to trade and commerce, incomes arising
from the use of “property”, and current transfers
– exports and imports of goods and services appear in the production
account and in expenditure on GDP
– exported goods and services are not part of domestic final demand
and so have to be added on to domestic final demand in estimating
expenditure-based GDP
– on the other hand, imported goods and services are recorded in the
components of domestic final demand and so imports are deducted
(in total) in estimating expenditure-based GDP to avoid double
counting them
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Structure of the RoW accounts (continued)
• The main types of transactions recorded in the RoW sector in
the capital account are capital transfers and non-produced
assets
• The financial account potentially has significant entries for the
rest of the world because it records transactions in financial
assets and liabilities between the country and all other
countries
• The balance sheets are also important for the rest of the
world because the holdings of assets and liabilities for
domestic sectors are in balance (by definition) so the rest of
the world has a potentially important influence on the level of
total net worth
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Rest of the world accounts
Uses
540
-41
6
44
-10
-51
17
38
-13
3
-10
Transactions and balancing items
Goods and services account
Imports of goods and services
Exports of goods and services
External balance of goods and services
Primary income account
Compensation of employees
Taxes on production and imports
Subsidies
Property income
External balance of primary income
External balance of goods, services and primary income
Secondary income account
Current transfers
External balance of secondary income
Adjustment for changes in pension entitlements
Current external balance
Capital account
Acquisitions less disposals of non-produced assets
Capital transfers, receivable
Capital transfers, payable
External capital account balance
Net lending (+) / net borrowing (–)
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Resources
499
2
38
55
4
-1
15
Balance sheet
• The balance sheet for the RoW provides important
information about a country’s international situation
– it is a statement of the stock of a country’s external
financial assets and liabilities
• The difference between the assets and liabilities represents
either a net claim on or a net liability to the rest of the world
– in the BPM6, this difference is referred to as the
international investment position (IIP)
• National net worth equals the net IIP plus non-financial assets
in the national balance sheet because resident-to-resident
financial claims net to zero in the national balance sheet
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References
• System of National Accounts, 2008 (Chapter 26 describes the
Rest of the world sector in detail)
• Balance of Payments and International Investment Position
Manual, Sixth Edition (BPM6)
• Standard International Trade Classification (SITC), Revision 4
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