1. The system of National Accounts A general introduction
Leo Hiemstra
Statistics Netherlands National Accounts in practice

2. A general introduction
National Accounts
A general introduction
Why national accounts?
Objectives
Contents
Main subsystems of national accounts
Macro-economic aggregates
Presentation of results
Production cycle and revision of national accounts
GDP and well-being
International developments, guidelines and related issues
Statistics Netherlands National Accounts in practice

3. Consistency and reliability Efficiency
National Accounts
1. Why national accounts?
Relevance
Consistency and reliability
Efficiency
Statistics Netherlands National Accounts in practice

4. 1. Why national accounts? Relevance
Monitoring the performance of an economy with a consistent set of indicators
Basis for economic theory
Model building
Coherent policy formulation (and evaluation)
Statistics Netherlands National Accounts in practice

5. 1. Why national accounts? B. Consistency and reliability
National accounts is a system with identities (definitional equations)
Checking data with the help of identities (e.g. the budget identity and transaction identity)
Complete description of the national economy
Statistics Netherlands National Accounts in practice

6. National Accounts
1. Why national accounts?
C. Efficiency
No overlaps/gaps in the statistical programme
Reduce administrative burden of respondents
Uniform concepts, definitions and accounting rules (SNA 1993 and ESA 1995)
Statistics Netherlands National Accounts in practice

7. National Accounts
1. Why national accounts?
Definition A comprehensive and systematic, quantitative description of economic phenomena in a country, related to a certain period of time
Statistics Netherlands National Accounts in practice

8. 2. Objectives Give of an overall picture of an economy
National Accounts
2. Objectives
Give of an overall picture of an economy
Compute summary indicators for measuring performance
Provide data for monitoring and forecasting the effects of socio-economic policies
Provide data within an analytical framework useful to economic theory
Provide data for international comparison
Provide data for administrative purposes
Statistics Netherlands National Accounts in practice

9. 3. Contents Roughly, national accounts contain: Commodity Production
1. The circular flow of income in a closed system
Production
structure
Commodity
Expenditures
Statistics Netherlands National Accounts in practice

10. 3. Contents Roughly, national accounts contain: Production Commodity
1. The circular flow of income in a closed system
Production
structure
Commodity
Expenditures
Income
Distribution
Statistics Netherlands National Accounts in practice

11. 3. Contents Roughly, national accounts contain: Production structure
1. The circular flow of income in a closed system
Production
structure
Commodity
Expenditures
Income
Distribution
Income
redistribution
Statistics Netherlands National Accounts in practice

12. 3. Contents Roughly, national accounts contain: Production structure
1. The circular flow of income in a closed system
Production
structure
Income
Distribution
Commodity
Expenditures
Income
redistribution
Statistics Netherlands National Accounts in practice

13. 3. Contents Roughly, national accounts contain: Production structure
1. The circular flow of income in a closed system
Production
structure
Income
Distribution
Commodity
Expenditures
Income
redistribution
Statistics Netherlands National Accounts in practice

14. 3. Contents Roughly, national accounts contain:
2. Exchanges with other systems:
other countries (imports, exports, transfers)
other periods (saving, investment, depreciation)
3. Flow of funds (financial accounts)
4. Other events (holding gains and losses)
5. Balance sheets
Statistics Netherlands National Accounts in practice

15. 4. Main subsystems of national accounts
Supply and use tables
Sector accounts
SAM
NAMEA RA
TSA
Labour accounts
Statistics Netherlands National Accounts in practice

16. 4. Main subsystems of national accounts
Sector accounts
Description of transactions (uses, resources) between institutional units
Transactions classified in accounts representing a specific economic process (e.g. production, income distribution, use of income, accumulation)
Derivation of relevant balancing items (e.g. gross domestic product, net national income)
Statistics Netherlands National Accounts in practice

17. 4. Main subsystems of national accounts
Sector accounts
0. Goods and services
1. Production Gross domestic product
2. Primary distribution of income National income
3. Secondary distribution of income Disposable income
4. Use of income Saving
5. Capital account Net lending/borrowing
6. Financial account Net lending/borrowing
7. Other changes in assets Change in net worth…
8. Balance sheets Net worth
Statistics Netherlands National Accounts in practice

18. 4. Main subsystems of national accounts
Sector accounts: example
production account
income accounts
capital account
Uses
financial account
Resources
transactions
balancing item
total
Stocks – assets
balance sheet
Stocks - liabilities
outstanding assets
outstanding liabilities
bal. item (= net worth)
Statistics Netherlands National Accounts in practice

19. 4. Main subsystems of national accounts
Supply and use tables
Detailed description of production process
Description of supply and use of goods and services
Supply table: row gives supply of specific product groups
Supply table: column gives production by industry
Use table: row gives destination of specific product group
Use table: column gives use of products in production process and resulting value added by industry.
Statistics Netherlands National Accounts in practice

20. 4. Main subsystems of national accounts

21. 4. Main subsystems of national accounts
Use matrix
agric.,
manuf
trade,
repair
govern-
ment
service
export
cons
priv
gov
cap.
form.
change
invent.
total
food, beverages
500 50 20
650
900
-20
2150
machines 75
800
400
1100
-75
3000
energy
200
100
275 25
other manufacture
550
150
450
925
300
2450
repair services
225
government services
750
other services
125
250
1350
2550
labour costs
2800
4725
operating surplus 30
825
2155
6500
850
2300
2575
4075
1450
-70
Statistics Netherlands National Accounts in practice

22. 4. Main subsystems of national accounts
Labour accounts
Integrated dataset on labour and wages
Consistency with corresponding data in sector accounts and supply and use tables
Examples: data on population and labour force, employment (hours worked, number of jobs, number of employees/self employed), compensation of employees
Statistics Netherlands National Accounts in practice

23. 5. Major macro-economic aggregates
National Accounts
5. Major macro-economic aggregates
GROSS DOMESTIC PRODUCT (GDP) =
output - intermediate consumption
compensation of employees +
gross operating surplus +
net taxes on production
final consumption expenditure +
gross fixed capital formation +
exports – imports
Statistics Netherlands National Accounts in practice

24. 5. Major macro-economic aggregates
National Accounts
5. Major macro-economic aggregates
Thus also three methods for estimation: 1. Production approach 2. Income approach 3. Expenditure approach 1 and 3 combined in the Input-output approach
Statistics Netherlands National Accounts in practice

25. 5. Major macro-economic aggregates
National Accounts
5. Major macro-economic aggregates
2. NET NATIONAL INCOME (NNI) =
gross domestic product (GDP)
+ primary income received from the rest of the world
- primary income paid to the rest of the world
- consumption of fixed capital
Statistics Netherlands National Accounts in practice

26. 5. Major macro-economic aggregates
National Accounts
5. Major macro-economic aggregates
3. NET NATIONAL DISPOSABLE INCOME =
net national income (NNI)
+ current transfers received from the rest of the world
- current transfers paid to the rest of the world
Statistics Netherlands National Accounts in practice

27. 5. Major macro-economic aggregates
National Accounts
5. Major macro-economic aggregates
4. NET NATIONAL SAVING =
net national disposable income
- final consumption expenditure
Statistics Netherlands National Accounts in practice

28. 5. Major macro-economic aggregates
National Accounts
5. Major macro-economic aggregates
5. NET LENDING/BORROWING =
net national saving
+ capital transfers received from the ROW
- capital transfers paid to the ROW
- fixed capital formation, net
Statistics Netherlands National Accounts in practice

29. 5. Major macro-economic aggregates
National Accounts
5. Major macro-economic aggregates
5-7. TOTAL CHANGES IN NET NATIONAL WORTH = net national saving + capital transfers received from the ROW - capital transfers paid to the ROW + net other volume changes in national assets and liabilities + net nominal holding gains of national assets and liabilities
Statistics Netherlands National Accounts in practice

30. 5. Major macro-economic aggregates
National Accounts
5. Major macro-economic aggregates
8. NET NATIONAL WORTH =
national non-financial assets
+ national financial assets
- national financial liabilities
Statistics Netherlands National Accounts in practice

31. 6. Presentation of results
National Accounts
6. Presentation of results
Presentation in three ways
1. Tables
e.g. volume changes of GDP and NNI (%)
2. Double-entry accounts (T-accounts)
e.g. production account
3. Matrices
e.g. supply and use table, input-output table and social accounting matrix (SAM)
Statistics Netherlands National Accounts in practice

32. 7. Production and revision of national accounts
Quarterly data
Flash estimates (t+45 days)
Regular estimates (t+90 days)
Remark: quarterly data are always adjusted to new annual data
Annual data
Provisional data (t+6 months)
Improved provisional data (t+15 months)
Final data (t+25 months)
Statistics Netherlands National Accounts in practice

33. 7. Production and revision of national accounts
Comparability in time: growth rates versus level estimates
Reasons
Conceptual changes
Link with (new) source statistics
Problems with ‘reconciliation’ of the data
Consistency between National Accounts subsystems
Frequency
Once every 5 years
Statistics Netherlands National Accounts in practice

34. 8. GDP and well-being GDP (or NI) ≠ well-being
National Accounts
8. GDP and well-being
GDP (or NI) ≠ well-being
GDP/NI = indicator for production and income
Well-being is multi-dimensional
Environment
Distribution of income and wealth
(Un)employment
Unpaid activities
=> health, security, freedom, etc.
Statistics Netherlands National Accounts in practice

35. 8. GDP and well-being Measurement of well-being? Three approaches
National Accounts
8. GDP and well-being
Measurement of well-being?
Three approaches
Monetisation and adjustment of GDP/NI (sustainable national income) or adjustment of saving (=> genuine saving)
Composite index by weighting together different dimensions of well-being (=> human development index)
Vector of indicators
Statistics Netherlands National Accounts in practice

36. 8. GDP and well-being Why not one indicator? No direct observation
National Accounts
8. GDP and well-being
Why not one indicator?
No direct observation
Methods for objective valuations often not available
Statistics versus modelling
Normative elements when defining and valuing ‘sustainability’
Micro/meso/macro link
Who determines the weights?
Catch all indicator realisable, useful?
Statistics Netherlands National Accounts in practice

37. 8. GDP and well-being Vector of indicators
National Accounts
8. GDP and well-being
Vector of indicators
One or more indicators for each dimension of well-being,
(1) based on observable phenomena,
(2) in a consistent framework:
Income and production: GDP/NI
Distribution: number of people in poverty
Environment: emissions of pollutants and (depletion of) natural resources
Unpaid activities: number of hours spent on household activities, volunteer jobs …
Statistics Netherlands National Accounts in practice

38. 9. International developments, guidelines and related issues
National Accounts
9. International developments, guidelines and related issues
(International) developments
Integrated Environmental and Economic Accounting (SEEA) 2003
UN Committee: compilation and publication of internationally comparable set of data on environmental issues
Important: increase international status => official statistics
Statistics Netherlands: SESAME-approach
modules for environment (NAMEA en NAMWA)
Distribution of income (SAM)
Future: more comprehensive “vector”
Statistics Netherlands National Accounts in practice

39. 9. International developments, guidelines and related issues
National Accounts
9. International developments, guidelines and related issues
System of National Accounts/ European System of Accounts
United Nations, OECD, Eurostat, IMF and World Bank (=> ISWGNA)
New SNA 2008/ ESA 2010:
Europe: 1st September 2014.
Main issues: non-financial assets (R&D, leases and licenses, etc.), pensions, government output, financial innovations, … (total of 44 issues)
Other Handbooks: government finance, R&D, price and volumes, etc.
Taskforce such as UN Global production
Statistics Netherlands National Accounts in practice

40. 9. International developments, guidelines and related issues
National Accounts
9. International developments, guidelines and related issues
European System of Accounts 2010
Regulation (not guidelines)
Relevant EU discussion groups:
WP on National Accounts, WP on Financial Accounts
Directors of Macro Economic Statistics ->ESSC (DGs).
CMFB (Committee on Monetary, Financial and Balance of Payment statistics, joint NSI/NCB)
Procedure for changing regulation: long!
Statistics Netherlands National Accounts in practice

41. 9. International developments, guidelines and related issues
National Accounts
9. International developments, guidelines and related issues
Administrative uses of NA-data
EU Own Resources: GNI and VAT => GNI Committee
EU Structural Funds: Regional GDP
EMU-criteria for Government Deficit and Debt => CMFB
Procedures:
Inventories
Visits by Eurostat
European Court of Auditors
Administrative use: good or bad?
New development: Macro Economic Imbalance Scoreboard
Statistics Netherlands National Accounts in practice

42. 10. Redesign of NA-system External developments:
National Accounts
10. Redesign of NA-system
External developments:
More data from registers, less data from surveys
Globalisation => measurement and conceptual problems
Transparency and reproduction
Efficiency and budget cut backs
Redesign of NA-system:
Discussion with major users
Benchmarking with other NSI’s
Research future methodology and architecture => consequences for statistical process as a whole
Statistics Netherlands National Accounts in practice

43. 10. Redesign of NA-system Research future methodology and architecture
National Accounts
10. Redesign of NA-system
Research future methodology and architecture
From goods to services
From SUT to income data (what about prices?)
Less details in SUT
Consequences for statistical process as a whole:
Focus of NA on integration of data (adjustments at the source)
Micro-integration of large and/or “complicated” enterprises
Estimates for small/medium enterprises: almost fully register based
National data => European data
Statistics Netherlands National Accounts in practice

44. The system of National Accounts A general introduction
Leo Hiemstra
Statistics Netherlands National Accounts in practice