Discrepancy between Financial Accounts and Capital Accounts Working

Discrepancy between Financial Accounts and Capital Accounts Working Party on Financial Statistics OECD Paris, France October 14, 2008 Susan Hume Mc. Intosh Sr. Economist and Special Project Coordinator Federal Reserve Board Washington, DC 20551 smc. Intosh@frb. gov 1

Organizational Structure in the United States 2 l U. S. has decentralized statistical system l BEA - current and capital accounts, BOP l FRB - financial accounts, balance sheets l Both NIPA and FFA have discrepancies l Jointly produce integrated macroeconomic accounts l Two versions of net lending/borrowing

Discrepancies in the Financial Accounts 3 l Discrepancies for most sectors l Discrepancies for a few instruments l Due to different data sources, NIPA discrepancy, timing of recorded transactions l Point out errors and poor estimates for missing data l Keep internal consistency of accounts since sector discrep. = instrument discrep.

Sector Discrepancies 4

Instrument Discrepancies 5

Total Sector/Instrument Discrepancy 6

Total Discrepancy as a Percent of Total Financial Assets 7

Integrated Macroeconomic Accounts for the United States 8 l Produce integrated accounts based on NIPA, ITA, and FFA. l Published on BEA’s website for 1960 -2007 annually l Structure based on guidelines in the System of National Accounts 1993 l Seven sector tables l Ongoing program to improve integration of NIPAs and FFA

What are Integrated Accounts? l Complete sequence of accounts: – – – 9 Current (production and income). Capital accumulation. Financial accumulation. Other changes in volume. Revaluation. Balance sheet.

Progression of Accounts 7. Capital gains (revaluations) 1. Balance sheet position 6. Other changes in volume 2. Production (current account) 3. Income & saving (current account) 5. Lending and borrowing (capital account) 10 4. Capital accumulation

Net Lending/Borrowing l Capital Account: net saving from the current account less fixed investment l Financial Account: net acquisition of financial assets less net increase of financial liabilities 11 l Use capital account version in sequence of accounts l Discrepancy between two versions shown in “other changes in volume”

Net Lending/Borrowing 12

Difference between Capital Account and Financial Account Net Lending/Borrowing 13

Where Are We Headed? l Both agencies have projects underway that would hopefully narrow the differences l Improvements related to sharing knowledge about source data and improving timing of transactions l Ongoing discussions of how new developments in the economy would be reflected in accounts l 14 Still many challenges due to limited source data for some sectors