INSTITUTIONAL SECTOR ACCOUNTS Peter van de Ven Head of National Accounts OECD Short Course on National Accounts IARIW-conference, August 23 – 24, 2014

2 Introduction Systematic presentation of sector accounts, based on an example developed for the Dutch NA-course Discussing some of the specificities Illustration of the framework, including consistency of data (transaction identity and budget identity) Achieving consistency: -Changing initial estimates -Checking plausibility of results Start: Delineation and details of institutional sectors

3 Main institutional sectors S.11: Non-financial corporations: Corporations principally engaged in the production of non-financial market goods and services S.12: Financial corporations: Corporations principally engaged in the production of financial market services S.13: Government: Institutional units engaged in the production of non-market goods and services, and redistribution of income S.14: Households: (Groups of) persons who share the same living accommodation, including unincorporated enterprises S.15: NPISHs: Non-profit institutions producing non-market goods and services, not controlled by government S.1: Total economy S.2: Rest of the World: Not a sectors, covers all transactions and positions with non-residents

4 Definition of institutional unit Definition of institutional unit: –Entitled to own goods or assets in its own right –Able to take economic decisions –Able to incur liabilities on its own behalf –Complete set of accounts, including balance sheets Two main types: households and legal or social entities Legal unit, enterprise, enterprise group Holdings, head offices, SPEs Delineation of quasi-corporations Market versus non-market: Economically significant prices => Sales <> 50% of production costs Profit versus non-profit

5 Profit shares across countries Operating surplus as % of value added at factor costs, non-financial corporations

6 Consolidation impact across countries Consolidation effect for liabilities in loans of non-financial corporations, in % of GDP

7 Further breakdowns (1) Breakdown of corporations by ownership/control: –Public corporations –National private corporations –Foreign controlled corporations Further breakdown of government: –Central government –State government –Local government –Social security funds

8 Further breakdowns (2) Further breakdown of financial corporations: –S.121: Central Bank –S.122: Deposit-taking corporation, excluding Central Bank –S.123: Money market funds (MMF) –S.124: Non-MMF investment funds –S.125: Other financial intermediaries, excluding insurance corporations and pension funds –S.126: Financial auxiliaries –S.127: Captive financial institutions and money lenders –S.128: Insurance corporations –S.129: Pension funds

9 I. Production account Overview of the system

10 II.1.1 Generation of income account NFCFCGOVHHNPISH Not sectorized Total economy ROWTotal S.11S.12S.13S.14S.15S.1NS.1S.2S.1 + S.2 Resources: Net domestic product (mp)225,821,145,350,91,950,8395,8-- Total225,821,145,350,91,950,8395,8-- Uses: Compensation of employees161,214,545,615,61,9-238,81,2240,0 Taxes on production and imports2,20,30,50,80,055,158,9- Less: subsidies-2,6-0,1-0,8-0,40,0-4,3-8,2- B2n = Operating surplus or65,06,40,034,90,0-106,3-- mixed income Total225,821,145,350,91,950,8395,81,2- Overview of the system

11 Specificities Operating surplus/mixed income as % of value added: –Non-financial corporations: 28.8% –Financial corporations:30.3% –Households:68.6%

12 II.1.2 Primary distribution of income Overview of the system

13 Specificities of property income Interest payments and receipts after taking into account implicit service charges (FISIM) –Interest on bank deposits = Actual interest plus FISIM –Interest on bank loans = Actual interest minus FISIM Reinvested earnings on Foreign Direct Investments –Non-distributed income also recorded as part of property income –Subsequently recorded as reinvestment in foreign subsidiary Investment income attributed to insurance policy holders: will come back to this later

14 II.2 Secondary distribution of income Overview of the system

15 Recording of (funded) pensions Combination of income and capital approach Property income earned by pension funds on accumulated assets considered as property income earned by policy holders Contributions = actual contributions plus contribution supplements (= property income attributed to insurance policy holders) minus service charge Benefits = actual benefits Income approach Adjustment for change in net equity of households on pension funds = above contributions minus benefits Capital approach

16 Recording of (funded) pensions Note defined benefit pension schemes: full accrual recording in which: Actual contributions equal accrued future benefits Imputed contributions equal winding down of relevant pension entitlements (discount rate) Note individual life insurance: only capital approach (no recording of transactions in secondary distribution of income accounts)

17 II.4 Use of income account NFCFCGOVHHNPISH Total economy ROWTotal S.11S.12S.13S.14S.15S.1S.2S.1 + S.2 Resources: Net disposable income29,022,0107,1231,73,9393,7-- Adjustm. for change in net equity---19,7- - of households on pension funds Total29,022,0107,1251,43,9413,4-- Uses: Final consumption expenditure--110,3228,84,1343,2-- Adjustm. for change in net equity-19,4--- 0,319,7 of households on pension funds B8n = Net saving29,02,6-3,222,6-0,250,8-- B12 = Current external balance ,6- Total29,022,0107,1251,43,9413,4-28,3- Overview of the system

18 Adjusted disposable income and actual consumption Some products are provided free or at reduced prices by government and NPISHs to households Differs substantially across countries Alternative definitions of disposable income and final consumption –Adjusted disposable income of households = disposable income of households plus social transfers in kind –Actual consumption of households = final consumption expenditure of households plus products provided free or at reduced prices by government and NPISHs –Social transfers in kind = products provided free or at reduced prices by government and NPISHs = individual consumption expenditure of government and NPISHs All consumption expenditure of NPISHs considered as individual Consumption expenditure of government subdivided into collective services and individual services (health, education, etc.)

19 III.1 Capital account Overview of the system

20 III.2 Financial account Overview of the system

21 III.3 Other changes in assets accounts Overview of the system

22 IV.3 Opening balance sheet Overview of the system

23 Overview of the system

Thank you for your attention! 24

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