NIPA – Flow of Funds Accounts Integration BEA Government Statistics Users Conference Charlotte Anne Bond Special Studies Branch September 14, 2006

2 Introduction  International standards call for these integrated accounts  In the U.S., the Bureau of Economic Analysis (BEA) produces income and capital accounts: National Income and Product Accounts (NIPAs)  The Federal Reserve Board (FRB) produces financial accounts: Flow of Funds Accounts (FFAs)  BEA and FRB are currently working to integrate the accounts to create a balance sheet that meets international guidelines

3 Background  The NIPAs show nonfinancial accounts and the FFAs feature financial accounts; together they provide a comprehensive picture of the government sector.  While the concepts in both accounts are the same, differing data sources and estimation methods employed cause the results to differ

4 Usefulness of Integration (illustration)

5 Thrust of this Project  Improve the quality and usefulness  Ensure consistent boundaries  Identify more data sources  Increase communication while preparing estimates

6 Flow of Funds Tables  Efforts to improve statistical consistency in the government accounts  FFA Tables F.105 (State and Local Government) and F.106 (Federal Government)  The focus of my example is on the Federal accounts; however, similar concerns exist for the State and Local accounts

7 F.106 Federal Government Lines 1-21 Billions of dollars Current receipts, NIPA basis1,868.61,974.82, Current expenditures, NIPA basis2,251.42,381.32, Net federal government saving, NIPA basis = Gross saving and net capital transfers Federal Reserve Flow of Funds Accounts Z.1 Release June 8, 2006

8 F.106 Federal Government Lines Billions of dollars Gross investment Net financial investment Net acq. of financial assets Net increase in liabilities Discrepancy Change in cash balance (5) Federal Reserve Flow of Funds Accounts Z.1 Release June 8, 2006

9 Statistical Discrepancy Flow of Funds Accounts, Table F.106 Billions of Dollars, Quarterly Statistics are at Annual Rates, Calendar Years and Seasonally Adjusted Quarters Line 2004 CY 2004 Q12004 Q22004 Q32004 Q4 10Current Expenditures2, ,347.22,364.92,387.02, Discrepancy Discrepancy as Percent of Current Expenditures0.34% 5.47%-1.02%-2.86%-0.26% 2005 CY 2005 Q12005 Q22005 Q32005 Q4 10Current Expenditures2, ,494.92,525.22,563.72, Discrepancy Discrepancy as Percent of Current Expenditures-0.11% 10.14%-7.06%-2.98%-0.38% Data gathered from FFA Table F.106 December and June 8, 2006.

10 What has been Accomplished  Teplin et al., “Integrated Macroeconomic Accounts for the United States: Draft SNA-USA”(2005) documents the past efforts in this project and lays out the future direction  Estimates are prepared for the draft SNA-USA structure for the period 1985 – 2002  Prospects are clear for improving the integration of the FFAs with the NIPAs and for bringing them closer into alignment with international standards  Progress on this project is described in a forthcoming article in the Survey of Current Business  Starting in late September, the two agencies will begin a regular, annual publication of the integrated estimates

11 FCC Spectrum Auctions  Efforts are underway to develop estimates for the electromagnetic spectrum  Estimates are needed for the Federal non-produced non-financial assets and for corporate sector balance sheets  A priority is to measure correctly receipts from spectrum auctions

12 Where We Go from Here  Improve estimates of changes in balance sheets that arise from sources other than transactions  Continue to investigate data sources and methods or concepts for real estate values in some sectors  Reconcile remaining differences between the current and accumulation accounts and the international transactions accounts  Improve alignment of U.S estimates with international standards

13 Questions  How important a problem is the quarterly volatility in the NIPA - FFA discrepancy?  Is it more important, in this project, to address statistical problems first, and then methods and concepts or vice versa?