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Discussion of ”Common Uses of National Accounts for Economic Policy and Some Implications for the Next SNA” by Derek Blades and ”A New Presentation of the National Accounts” by Jacques Bournay Helen Stone Tice 25 August 2006 Common goal, to simplify the 1993 SNA, but rather different approaches • Blades wants national accountants to provide . . .”the kinds of data that their coustomers actually want rather than elaborating a comprehensive set of national accounts most of which may be of purely academic interest.” • Bournay wants to change the traditional presentation to accommodate a more intuitive and theoretically satisfactory treatment of taxes and government production. Outline of Derek Blades’ Paper • • • • Recent history Statistics needed for macroeconomic policy Statistics for structural adjustment policies Lessons for the next SNA Recent History. . .since the 1930s • Accounts initially used to show relationships between consumption, investment and saving and how governments could manipulate these aggregates to influence overall economic activity and employment. • Subsequent shifts in fashion, but since 1980s economic role for government has been provision of (1) stable macroeconomic conditions and (2) appropriate regulatory systems. Statistics Needed for Macroeconomic Policy • Using the OECD Economic Outlook as a model, the kinds of economic statistics on which macroeconomic policy is based fall into 4 groups – – – – Employment, income and inflation Financial indicators Demand and output External indicators • Table 1 in the paper shows the 29 Economic Outlook variables in these 4 groups. Table1 National accounts and other economic variables used in OECD semi-annual forecasts Employment, income and inflation Employment, unemployment rate, compensation per employee, unit labour cost, labour productivity External indicators Merchandise exports, merchandise imports, Invisibles (net), current account balance, merchandise export volumes, merchandise import volumes, export performance, terms of trade Financial indicators Household saving ratio General government financial balance Short term interest rates Long term interest rates Table1 . . . comtinued Demand and output Private consumption Government consumption Gross fixed investment Public Residential Non-residential Final domestic demand Stockbuilding Total domestic demand Exports of goods and services Imports of goods and services GDP at market prices Macroeconomic Policy . . .continued • Of the 29 variables in table 1, only 14 drawn directly from the national accounts – – – – Goods and services account at constant prices General government sector account up to net lending Household sector account up to saving Rest of the world account (current account balance) • Some national accounts aggregates not in SNA – Final domestic demand – Total domestic demand – Breakdown of gross fixed investment Macroeconomic Policy . . .continued • Central banks need more timely data, so they may not even use national accounts aggregates, focusing instead on high-frequency indicators – CPI – Employment – Unemployment rate – Unit labor cost – ”Confidence” Statistics for Structural Adjustment • Structural adjustment policies aimed at – Improving efficiency of markets for labor, capital, products – Improving efficiency of government provision of health, education, social services – Ensuring sustainability of economic growth • Most use specialized statistics drawn from administrative records, but they – Use GDP as reference point for indicators – Use growth accounting to identify areas in which such adjustments are needed. The Bottom Line: National Accounts Statistics Needed for Macroeconomic and Structural Adjustment Policies • Macroeconomic policy – Final expenditure on GDP at current and constant prices – Rest of world, government, and household sector accounts • Structural adjustment policy – GDP at current and constant prices Lessons for 1993 SNA, Rev. 1 1. Get the level of GDP right 2. Get priorities right—bring back milestones 3. Keep it simple – ”can half the UN member nations implement this in the forseeable future?” 4. Meet economists half way 5. Learn from ICP experience Outline of Jacques Bournay’s Paper • • • • • Introduction: GDP at basic prices The sequence of accounts Another allocation of government production Conclusions Basic Premise ”Apart from non-financial market sectors for which direct information on sales and prices are available, the measure of production of the other sectors needs theoretical and practical conventions that are of consequence in the results.” Early use of indirect taxes as measure of nonmarket output of government, now use costs Change Focus from ”Market” to ”Basic” GDP_bp + Imports + (Taxes – Subsidies on products) = GDP_mp GDP at basic prices—producer prices GDP at market prices—acquisition prices Taxes less subsidies on products now an adjustment item Changing The Conventions on the Treatment of Taxes and Government Production 1. Make GDP_bp the primary measure, not GDP_mp. 2. Put all redistribution in a redesigned Secondary Distribution of Income Account • • A tax is a tax and a subsidy is a subsidy A transfer is a transfer 3. Allocate that part of government production now shown as collective consumption between intermediate consumption and household final consumption. New Secondary Distribution of Income Account Advantages of Focus on GDP_bp • GDP is now the sum of value added over all sectors • GDP is also equal to the sum of compensation of employees and gross operating surplus • Net taxes on products made explicit Advantages of New Sequence of Accounts • Highlights two functions of government – Production of nonmarket services – Redistribution of the national income • Subsidies shown as positive uses and resources, not negative taxes • All transfers shown as positive, with no distinction between current and capital • No need for nominal sector for taxes on products Allocation of Actual Final Consumption of Government • Currently there is no clear sense of who uses this output • Some government production is intermediate consumption, not final demand • As a first approximation, why not allocate it in proportion to intermediate and final consumption of each sector Comments on the Blades Paper • Nice overview of evolution of the accounts and their use for policy. • Some of the items in table 1 that aren’t bolded come from datasets that are supposed to be harmonized with SNA. This contextual role for the accounts needs to be featured both in this discussion and in practice. • If you keep things too simple, will policy makers eventually decide just to add up the major indicators for themselves and forget about GDP—and the rest of the national accounts? Comments on the Bournay Paper • The allocation of the present actual final consumption of government is appealing in principle, but the method proposed is too crude. • Replacing GDP_mp with GDP_bp is an intuitively appealing and elegant streamlining of what many have found to be a murky thicket in the sequence of accounts, but . . . • Data sources for GDP_mp are available on a more timely basis than those for GDP_bp. Can we combine the two suggestions? • Use basic prices as the starting point for the redefined and streamlined sequence of accounts • Show the derivation of market price aggregates from components of this sequence • Provide a convenient presentation of the national accounts aggregates ”that users want”