Integrated Macroeconomic Accounts for Integrated Macroeconomic Accounts for the United States: Draft SNA-USAthe United States: Draft SNA-USA

Prepared for:

OECD Working Party on Financial Statistics Meeting

October 11, 2004Paris, France

Draft SNA-USA2

Joint Projectof Federal Reserve BoardFederal Reserve Board and Bureau of Economic AnalysisBureau of Economic Analysis

Paper prepared for NBER/Conference on Research in Income and Wealth, Architecture for the National Accounts, April 16-17, 2004 in Washington, D.C.

Authors:Albert M. Teplin (CSE Analysis)

Rochelle Antoniewicz, Susan Hume McIntosh, Michael Palumbo, and Genevieve Solomon (Board of Governors of the Federal Reserve System)

Charles Ian Mead, Karin Moses, Brent Moulton (Bureau of Economic Analysis, Department of Commerce)

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Project Goals Produce integrated accounts—Draft SNA-USA—based on

NIPA, ITA, and FFA.

Identify inconsistencies among existing accounts.

Eliminate inconsistencies where possible for Draft SNA-USA.

Develop a program to:– Deal with remaining inconsistencies.– Correct other deficiencies.– Enhance presentation.

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What are Integrated Accounts?

Draft SNA-USA follows SNA93 structure with a complete sequence of accounts:

– Current (production and income).– Capital accumulation.– Financial accumulation.– Other changes in volume. – Revaluation.– Balance sheet.

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7. Capitalgains

(revaluations)

3. Income & saving

(current account)

2. Production(current account)

6. Otherchanges

in volume

5. Lending andborrowing

(capital account)4. Capital

accumulation

1. Balance sheetposition

Progression of Accounts

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Data for Draft SNA-USA are Mostly Available

Major components are provided in the NIPA, ITA, and FFA (see text table A on page 9).

We needed to:– Expand sector detail. – Resolve inconsistencies in sector boundary

definitions.– Improve depth of content for some accounts.– Standardize format and terminology among

accounts and relative to SNA93.

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Shortcomings of NIPARelative to Integrated Accounts

BEA provides production by industry in separate input-output and GDP-by-industry accounts, while integrated accounts in SNA93 envision providing production by sector.

NIPA sectors in the production account differ from those in the income account, while integrated accounts in SNA93 call for consistently defined sectors throughout.

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Shortcomings of FFARelative to Integrated Accounts

FFA ‘other changes in volume’ and ‘revaluation’ accounts lack the depth envisioned for integrated accounts.

FFA balance sheet accounts are limited to a few sectors, and estimates necessary for full articulation of changes in net worth are not available for all sectors.

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Draft SNA-USA HasFive Sectors and Several Subsectors

1.Households and nonprofit institutions serving households

2.Nonfinancial business, split into: Nonfinancial corporate business Nonfinancial noncorporate business

3.Financial business.4.General government split between:

Federal government State and local governments

5.Rest of the world.

(See text table B on page 11 for more details)

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Important Characteristics of Draft SNA-USA

Time series format; annual 1985 -2002.

Official data as of June 10, 2004, where available.

GDP/Value-added measured from the income-side estimates in the NIPA; no attempt to disperse the NIPA statistical discrepancy among sectors.

Favors net lending/net borrowing in the capital account, rather than the financial account, for estimates of changes in net worth.

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Additional Features of Draft SNA-USA

Explicit accounting of statistical discrepancy between net lending/net borrowing in capital account and financial account.

Inclusion of consumer durable goods in household balance sheet.

A complete set of accounts is shown for all sectors, although it required some estimates not in NIPAs or FFAs.

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Draft SNA-USA Compared with SNA93 and Current Publications

No separate sector for nonprofits institutions as in NIPA and FFA.

Separate sector for noncorporate nonfinancial businesses, which is not in SNA93.

Treatment of housing is consistent with current publications but not SNA93.

Placement of government enterprises in the government sectors differs from NIPA treatment.

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Draft SNA-USA Table 1: Total Economy - Current Account

(page 22)

Illustrates income-side approach.

Net national income = gross value added + net income receipts from rest of world

GDP in Draft SNA-USA differs with that shown in NIPA, by the NIPA statistical discrepancy (lines 42-44).

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Draft SNA-USA Table 3: Households and NPISH

Net saving and disposable income differ slightly between Draft SNA-USA and NIPA.

The level of the household saving rate is a bit higher than in NIPA.

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Draft SNA-USA Table 3: Households and NPISH

Capital account excludes net additions to the stock of consumer durable goods.

Financial account measure of net lending/net borrowing is not used.

Financial account statistical discrepancy (balancing item) included in the other changes in volume account.

Net investment in consumer durable goods is in the other changes in volume account.

Capital gains/losses are in the revaluation account.

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Draft SNA-USA Table 3: Households and NPISH

Change in sector net worth is the sum of:– Net capital formation.– Net lending/net borrowing (capital

account).– Other changes in volume (includes

discrepancy).– Nominal holding/gains and losses.

The change in net worth and level of net worth is the same as published in FFA.

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Draft SNA-USA Table 3: Households and NPISH

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Draft SNA-USA Table 5: Nonfinancial Corporate Business

Statistical discrepancy between capital and financial accounts is treated the same as in the household sector.

The calculation of net worth in Draft SNA-USA is substantially different than figures published in FFA.

– In FFA, net worth is the market (or replacement) value of assets less liabilities, excluding the market value of shares.

– In Draft SNA-USA, net worth is the market value (or replacement) value of assets less liabilities, including the market value of shares.

– The Draft SNA-USA net worth is a variant of Tobin’s Q.

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Draft SNA-USA Table 5: Nonfinancial Corporate Business

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Draft SNA-USA Table 5: Nonfinancial Corporate Business

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Selected Issues

Forced a closer look by both agencies of sector discrepancies.

In particular, the discrepancies for the business sectors are of concern.

– Boundary between nonfinancial and financial sectors.

– Booking of miscellaneous financial assets, in particular the accounting for goodwill and other intangible assets.

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Where Do We Go From Here?

Exercise shows agencies can produce workable integrated macroeconomic accounts with current data;

But, considerable investment would be needed to produce integrated accounts for the period before 1985 and accounts on a continuing basis.

Both agencies have projects underway that would further develop and refine Draft SNA-USA.

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Mapping FOF Sectors into SNA

Nonfinancial business

Nonfarm nonfinancial corporate business

Nonfarm noncorporate business

Farm business

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Mapping FOF Sectors into SNA

Monetary financial institutions

Monetary authorityU.S.-chartered commercial banksForeign banking offices in U.S.Bank holding companiesBanks in U.S.-affiliated areasSavings institutionsCredit unions

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Mapping FOF Sectors into SNA

Other financial intermediariesMoney market mutual funds, Mutual fundsClosed-end and Exchange-traded fundsGovernment-sponsored enterprisesAgency- and GSE-backed mortgage poolsIssuers of asset-backed securitiesFinance companiesMortgage companiesReal estate investment trustsSecurity brokers and dealersFunding corporations

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Sector Issues

Should money market mutual funds be in ‘other monetary financial institutions’?

Should security brokers and dealers be classified as a ‘financial auxiliaries’?

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Mapping FOF Sectors into SNA

Insurance corporations and pension funds

Life insurance companiesOther insurance companiesPrivate pension fundsState and local govt. employee retirement fundsFederal government retirement funds

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Mapping FOF Sectors into SNA

Central govt. = Federal govt.

State govt. = State and local govt. Households and nonprofit institutions

Households and nonprofit organizationBank personal trusts

Rest of the world = Rest of the world

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OECD Matrix Submission(Annex 4, pages 48-51)

Data from quarterly FFA fame database Time series begin in 1945 Flow series names: FA123456789 Levels series names: FL123456789 Coded matrix extracts series from database Some cells calculated in matrix Updated each quarter after FFA published