Transcript Argentina and Brazil

Financial Accounts for Argentina, Brazil,
China, India and Indonesia within the SNA
standards: issues and challenges
Daniele Fano
University of Rome Tor Vergata and Pioneer Investments, UniCredit Group.
Abhishek Gon
PhD candidate in Banking and Finance, University of Rome Tor Vergata
Belen Zinni
PhD candidate in International Economics, University of Rome Tor Vergata
OECD Working Party on Financial Statistics
Paris, November 29- December 1, 2010
Why Financial Accounts are so important…
A complete and consistent set of figures: data on some relevant financial flows
(such as public deficit) or financial stocks (such as the levels of debt for
various sectors) exist for all countries. Only Financial Accounts provide within
the SNA system a way of setting them within an exhaustive and logical
framework, providing the best consistency check of flow and stock data
Key financial stability indicators, for each domestic sector, for all sectors in
conjunction and in the global context
Effective policy monitoring tools:
Monetary policy: velocity of money, open market operations
Fiscal policy: dimensions, impact, sustainability
Ways of assessing macro-trends, for example in terms of the public finance and the
households’ ability to match life cycle needs
…especially for the G20 Emerging Economies




Financial development process, leading to a more complex
array of financial instruments. Many of these economies are
rapidly building a sophisticated domestic financial sector
Household finance becoming more relevant also because of
demographic and life-cycle challenges; Government and
Public Sector role evolving;
Interrelations across sectors becoming more complex; NonFinancial Corporations part of the Global Economy
These countries have an impact on International Stability
Our objectives
1)





2)
To document the progress in the implementation of
Financial Accounts in:
Argentina
Brazil
China
India
Indonesia
Wherever these data are missing, to start filling this gap by
collecting and approximating Financial Accounts data
Goldsmith’s pioneering work on National Financial
Balance Sheets, and more recent contributions

Goldsmith (1985)

Aron & Muellbauer (2006)

Davies, Sandstrom, Shorrocks and Wolff(2009)

The IMF
• A Historical Public Debt Database by Abbas et.al. (2010)
• International Financial Statistics (IFS)

The World Bank
• Financial structure dataset by Beck and Demirgüç-Kunt (2010)
• World Development Indicators (WDI)

Last but not least, the OECD,
with the National Accounts database and
additional databases such as Pensions.
Our approach
Collecting flow and stock data according to the following rank of
sources:
1- Financial Accounts / Financial Balance Sheets
2- Partial official data (Central Banks, National Statistics Offices,
Regulators, Ministres, Secretariats, etc.)
3- Partial non official data (Professional Associations)
4- Approximations: based on the available official data and the
economic literature
5- Estimations (important in order to try to draw a full picture but out
of the scope of today’s discussion)
Some of the issues we face

Definition Issues: the same items may be called in a
different way, there is a need for translation ( e.g. items that fall
into uses are, in the context, assets, etc ..)

Item Breakdown Issues: in some cases the breakdown may
not correspond to the SNA, both for sectors (e.g. Indonesia
does not have a separate household sector), and for
instruments

Exhaustiveness Issues: there may not be any way to match
the sum of the items with a total derived from an independent
source

Consolidation and Other Data Collection Issues: we
do not really know to what extent the “intra-sector” data we use
have been consolidated
Ranking different sources of flow and stock data
In the following tables we report the quality of each data source as
follows:
-
Full availability of data: covering both all asset categories
and all institutional sectors as defined in the System of National
Accounts (SNA) 1993 and 2008 guidelines
-
Partial availability of data: covering some (not all) asset
categories and/or some (not all) institutional sectors
 - No availability of data: neither for any asset category nor for
any institutional sector
u-
Under investigation.
Ranking and assessing different data sources of
Financial Flows
Rank
Sources
Argentina
Brazil
China
India
Indonesia

~
1
Financial Accounts - Flows
X
X

2
Partial Official Data
Central Bank
National Statistics Office
Regulators
Other government sources
X






X


u
X


u
X
Partial Counterparty Data
Trade associations
X
X
u
u
4
International Sources



5
Approximations
u
u
u
6
Estimations
u
u
u
3
NB: Work in progress.


u
u
u
Ranking and assessing different data sources of
Financial Stocks
Rank
Sources
Argentina
Brazil
China
India
Indonesia
1
Financial Balance Sheet - Stocks

X

X
X
2
Partial Official Data
Central Bank
National Statistics Office
Regulators
Other government sources





X

X

u
u
X
X
X

X
X
X
u
X
Partial Counterparty Data
Trade associations


u

u
4
International Sources





5
Approximations


u
u
u
6
Estimations
u
u
u
u
u
3
NB: Work in progress.
A few highlights: presenting collected data, with
necessary caveats
We would like to end with some selected highlights on the countries of
interest, keeping in mind that:
 We will refer only to for which we have a high degree of confidence and
that are consistent with the SNA definitions
 We use GDP as our numéraire (denominator)
 These figures do represent work in progress and are therefore subject
to revision
Argentina and Brazil: a tale of two countries
While looking at Argentina and Brazil two questions are of
obvious interest


Do we detect some medium-term trends?
What has been the impact of the recent financial crisis?
We start by constructing the Household Financial Balance Sheets
(and some main indicators concerning the General
Government sector) as households are the key savings engine
of the economy and play a key role in its overall equlibrium
In fact we can say that while the medium term trends are the
opposite, both countries have been relatively insulated from
the impact of the recent crisis
Argentina and Brazil: a tale of two countries (cont.)

Medium term trends
Brazil shows an impressive growth in domestic households assets and liabilities.
In a period of strong GDP growth
 Government and corporate securities held by the non-financial private sector, as ratio
to GDP doubled from16% of GDP in 2000 to 32% in 2009
 In the same period pension fund holdings jumped from 12% of GDP to 16% of GDP and
liabilities (loans) from 7% to 18% of GDP
 In 2009 assets in mutual funds accounted for 28% of GDP
Argentina on the contrary shows an erosion of household financial wealth
 Currency and deposits go from 24% of GDP in 2000 to 17% in 2009 (especially due to
the category Other deposits)
 Mutual funds shares represent almost 2% of GDP in 2000; after the 2001 crises this
ratio decreased significantly and in 2009 was 0.16% of GDP
 Pension funds reserves were 13% of GDP in 2006; they became zero after the
nationalization of pension funds in December 2008

More recent trends
◦ Both countries have been able to weather the crisis, keeping a public sector
primary surplus and an acceptable current account deficit.
◦ The crisis has not affected the trend in key household holdings
Argentina and Brazil: a tale of two countries (cont.)



Should we go back to Goldsmith’s intuition that the build-up of a
domestic “financial superstructure” is at the basis of the economic
development ?
In fact the evidence not only for Brazil, but also for example the Central
and Eastern European Countries, is that in a context of steady growth
the domestic financial sector and household financial wealth grow at a
much higher rate than the GDP.
The case of Argentina shows that, in reverse, when growth hits a
bottleneck, the “financial superstructure” can have not only an overall
decline but also lose some pillars, as is the case of pension funds that
have disappeared from the set of household assets as a result of their
nationalization in 2008
We are exploring the notion of a threshold effect: before and beyond a
certain level of GDP per capita, conditioned on other macroeconomic
variables, household financial wealth seems to accumulate at different
rates
India: the physiology of a high savings high growth nation with
an increasingly sophisticated financial system (1)

Indian Households consistent net lenders to all sectors.

Non-financial Corporations important & sophisticated
borrowers.

Government “intermediation” role declining.

Important role of institutional investors (“other financial
institutions”), within a relevant Financial Sector.
India: the physiology of a high savings high growth nation (2)
From fiscal year 2001-2002…
Beyond the SNA, a full “From Whom to Whom” Matrix.
India: the physiology of a high savings high growth nation (3)
…to fiscal year 2007-2008
Non-Financial Corporations appear quite financial market - oriented.
Liabilities:
Non-Financial Corporations’s two main sources of borrowing :
Loans & advances and Corporate bonds.
•Who bought Corporate Bonds in 2007-08?
 Rest of the World are primary buyers of corporate bonds.
 Besides Financial Intermediaries, Households share has increased
substantially.
 The role of Government has decreased over the period.
India: translating the Flow of Funds into SNA standards
Indonesia: 2002 to 2005, a ‘four sector’ matrix
• Indonesia has enjoyed a surplus with Rest of the World.
• Financial Flows have been concentrated in traditional Deposits & Loans.
• The Role of Government declining.
Summarizing
Beware, but be not afraid of trespassing!

A long way to go

Beware
◦ of partial data:
 they may not be readily translatable in the SNA standards: ex insurance
premiums
 it is easy to miss some relevant components comprised in bank accounts,
securities other than shares, equities, mutual funds
◦ of cross-country comparisons:
 data consolidation principles may differ
 dncomplete data may lead to underestimation of single items

But, however cumbersome, progress can be done and it
is useful
◦ There is a wealth of data ready to be collected and assembled and…
◦ As Anthony Atkinson once wrote, looking at the figures is always better than
consulting one’s prejudices









Abbas, S.M. A., N. Belhocine, A. El-Ganainy and M. Horton. A Historical Public Debt Database, IMF Working Paper WP/10/245,
Washington, DC. 2010.
Aron J. and J. Muellbauer. Estimating Household Financial Balance Sheets in South Africa, 1970-2003. Review of Income and
Wealth, Series 52, Nº2, June 2006.
Beck, T. and A. Demirgüç-Kunt, Financial Institutions and Markets Across Countries and over Time: Data and Analysis. World Bank
Policy Research Working Paper No. 4943, May 2009.
Coremberg. A. La riqueza de los argentinos. El balance de la economía argentina: una primera aproximación. Fundación Bolsa de
Comercio, 2006.
Davies, J., S. Sandström, A. Shorrocks and E. Wolff. The level and distribution of global household wealth. National Bureau of
Economics Research (NBER). Working paper 15508. November 2009.
Fano , D.., M. Georgieva, L. Marzorati and T. Sbano. Wealth effects in the new Europe countries. PGAM Economic Research.
Goldsmith, R. W. Comparative National Balance Sheets. A study of twenty countries 1688-1978. The University of Chicago Press,
Chicago and London, 1985.
International Financial Statistics, International Monetary Fund online.
Lane, P. and G.M. Milessi-Ferretti. The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and
Liabilities, 1970-2004. Macrofinancial linkages. Trends, crises and policies. International Monetary Funds, Washington D.C,
2010. Chapter 8.

OECD statistics online.

World Development Indicators, World Bank, 2010.