Understanding National Accounts

Understanding National Accounts

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François Lequiller, Derek Blades
20 Oct 2014
9789264214637 (PDF) ; 9789264224117 (EPUB) ;9789264214620(print)

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This second edition of Understanding National Accounts, that provides a comprehensive explanation of how national accounts are compiled, contains new data and new chapters, and is adapted to the new systems of national accounts, SNA 2008 and ESA 2010, that came into effect in September 2014. It approaches national accounts from a truly global perspective, with special chapters dedicated to international comparisons, globalisation and well-being as well as to the national systems used in major OECD economies, such as the United States.

Each chapter of the manual uses practical examples to explain key concepts in national accounts in a clear and accessible way. And, each chapter concludes with a synthesis of key points covered in the chapter, followed by resources for further exploring the topic, and by a set of exercises to test your knowledge. It is an ideal guide to national accounts for students and other interested readers.

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  • Foreword

    Today more than ever, national accounts remain at the core of a modern system of economic statistics. The global economic and financial crisis has further underlined the importance of a timely, reliable and comprehensive monitoring of economic activity and also pointed to directions for new developments and extensions in the accounts. National accounts provide the conceptual and actual tool to bring coherence to hundreds of statistical sources available in OECD countries. They deliver essential macro-economic indicators to guide policymaking.

  • The essential macroeconomic aggregates

    This chapter offers an initial definition of essential macroeconomic variables, taken from the May 2013 edition of OECD Economic Outlook. Germany is taken as the example country. The chapter first looks at GDP, before turning to the other principal indicators used by the OECD economists: private consumption, gross fixed capital formation, GDP deflator, household saving ratio and financial balance of general government.

  • Distinguishing between volume and price increases

    This chapter considers growth, the overall change in the quantity of goods and services produced and made available to consumers and investors, as measured by changes in volume. The main task of national accounts is to separate out, within the change in the observed monetary aggregates, the part of growth that comes from a change in quantities from the part of growth due to a change in prices. The chapter explains in detail how statisticians set about distinguishing these changes through what is known as the volume/price breakdown.

  • International comparisons

    This chapter examines the comparison of national accounts data among several countries. Cross-country comparisons are more difficult because: the statistical methods for estimating national accounts variables can vary from one country to another; countries’ national institutions may be different; and countries do not have the same currency and the same price levels. Nevertheless, such comparisons can be made, even if in some cases adjustments are to be made. They are achieved by comparing: the growth rates of certain variables (such as GDP in volume), certain ratios (such as the profit rate or the public debt ratio) and the absolute levels of certain national variables among several countries (such as the level of GDP per capita).

  • Production: What it includes and excludes

    This chapter looks at measuring production. Broadly, production leads to an output of goods and services, creating jobs, and generating income. Output is a central concept for national accounts, but what does output cover precisely? This chapter traces the production frontier, looking at how economists decide what to include in GDP and what to exclude. It considers the relation of the illegal and underground economies to this frontier, and it also looks at the measurement of output and of value added.

  • Defining final uses of GDP

    Changes in the final uses of GDP, or demand, determine the growth of real GDP in the short term. Governments generally try to influence three variables in order to maintain growth at a rate that keeps inflation and employment at the desired levels: demand from households, public consumption and investment. Together, these variables are known as domestic demand. Economists look at this demand, as well as at external demand and net exports, when trying to predict future economic developments. This chapter looks at measuring and shaping demand and at what is contained in each of the components of final uses.

  • The household account

    This chapter defines the three key indicators in the household account: household final consumption expenditure, household disposable income, and saving. It next looks at how these three indicators are identified and presented in the household sector accounts. Finally, the chapter considers an alternative way to measure household disposable income and consumption proposed by SNA 2008.

  • Business accounts

    The institutional framework in which firms operate matters for national accounts. In national accounts, they are divided into two groups: corporations and unincorporated enterprises. The latter are small and do not have corporate status or complete sets of accounts, but may make a significant contribution to total value added. This chapter first examines the accounts of non-financial corporations and then returns to those of unincorporated enterprises.

  • The financial and balance sheet accounts

    Financial accounts and balance sheet accounts in national accounts are the source of financial and non-financial stock data of households, and other institutional sectors (financial and non-financial corporations, and general government). These accounts make it possible to calculate not only the net worth of various groups at a given moment, but also to examine how this has evolved over time. This chapter describes the organization of these accounts.

  • The general government account

    This chapter first describes general government accounts and outlines the composition of general government. Next, it explains how to calculate the four major public finance indicators: general government deficit, general government debt, general government expenditure, and taxes and compulsory social contributions.

  • The input-output table and integrated economic accounts

    National accounts constitute one of the rare cases in which statisticians provide tables that are (almost) completely consistent, and it is this that gives national accounts their potency. This chapter explores how these consistent tables come to be, focusing on supply-and-use tables, aggregate supply and final uses tables, the intermediate use table, and the input-output table. It concludes by considering calculations of GDP and also examines integrated economic accounts.

  • The national accounts machinery: Compilation and reporting

    This chapter looks at the machinery of national accounts. It explains how national accounts are compiled and describes the main consequences of this process for the user of national accounts. It first discusses quarterly accounts then examines the relationship between quarterly national accounts and annual national accounts. Finally, it turns to ordinary revisions and comprehensive revisions in the national accounts. It uses France as the example country, but the lessons drawn are applicable for other countries as well.

  • The national income and product accounts of the United States

    This chapter focuses on the United States and its National Income and Product Accounts, otherwise known as NIPA. It first presents the history of NIPAs from the 1930s through to today. It looks at the NIPA summary account tables, and at other NIPA tables, and it explains how NIPAs are disseminated. Next, it considers the other sets of national, industry, regional, and international accounts produced by the Bureau of Economic Analysis (BEA) and integrated with the NIPAs, as well as programmes that provide source data used for the preparation of the NIPAs. Finally, the chapter discusses the importance of the BEA’s advance quarterly GDP estimate and explains the methodology used to prepare it.

  • The 2007-2009 financial crisis and recession: Reflections in the national accounts

    This chapter describes the financial crisis and recession as reflected in the national accounts of OECD countries. It first summarises how the 2008-09 recession affected GDP and other major national accounts data, including the financial accounts and balance sheets, focusing on the experience of the OECD in aggregate and of the G7 countries. Next, the chapter considers how the rate of recovery has differed across countries since 2009. It then looks back at the period leading up to the recession and at how some of the imbalances were reflected in national accounts. The chapter concludes by considering the data gaps in accounts that were exposed by the crisis: what relevant information would policy makers have liked to have had, but which national accounts were unable to provide? It also discusses some of the steps that are being taken to address these gaps.

  • International systems of national accounts: Past and future

    This chapter presents the history of systems of national accounts, from the 17th century to today. After a look at the earliest accounts, it offers in-depth analysis of the 1953, 1968, 1993 and 2008 systems of national accounts (SNAs). It also looks at the 1995 and 2010 European System of Accounts (ESA). For both, it clearly explains what aspects of SNAs and ESAs have evolved across the years, with helpful boxes outlining the changes in each iteration, in particular the latest one (SNA 2008/ESA 2010).

  • GDP as a welfare metric: The beyond GDP agenda

    This chapter discusses the limitations of GDP for measuring welfare and well-being. It illustrates the recent development of better life indicators, both inside and outside the national accounts framework, which allow to measure these two complex concepts, but so important for the society.

  • National accounts in a globalising world

    This chapter illustrates the increasing trend of globalisation, whereby products are the result of processes taking place all around the world. It proposes a new statistical tool, TiVA, to better understand these interlinked international trade flows. It discusses how to maintain the quality of national accounts statistics in this more and more globalised world.

  • Glossary

    An equality between national accounts variable which stands by definition.

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