Module 2: overview

ESCAP Statistics Division

Regional Programme on Economic Statistics
2018
Introduction
• The economy
• Sustainable Development Goals (SDGs)
• Core Set of Economic Statistics
• 2008 SNA as a framework for measuring economic activity
• Links to other macro-economic data sets
• Uses and users of macro-economic statistics

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An economy…
• It’s a place in which many many things going on – people, households,
businesses, governments, other organisations are doing things:
• Making things, growing things, buying and selling, borrowing and
lending money…
• They save and spend, they give things to others…
• They obtain goods and services from other places, and sell and give
things to other places…
• They use and provide labour and skills, they use natural resources and
man-made machines…
• And we (statisticians and the government and others) would like to
make some sense of all of this stuff going on
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Measuring an economy
• Governments and other agencies would like to make some sense of all of
this stuff going on
• So we (statisticians) want to
• observe
• measure
• organise/summarise and
• present information about the economy
• in a way that is meaningful to others
• we need some rules to describe and measure what is happening in an
economy
• We use the System of National Accounts – it provides a framework for
explaining what is happening in an economy.
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More formally - what is an economy?
• It includes the territory under the control of a government
• plus the resident entities – individuals, businesses, government, other
organisations
• Activities of production, distribution (trade) and consumption of goods and
services AND accumulation
• Using available resources – land and other natural resources, labour,
capital, entrepreneurial skills and knowledge and other goods and services
• Formal and informal activities
• Legal and illegal activities
Note: documentation – metadata for publication and detailed
documentation for users
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Why do we want to measure what is
happening?
• Macroeconomics studies the behaviour and performance of the economy
• Macroeconomic statistics describe
• what is taking place in a period of time (transactions and other flows)
and
• Where the economy is at particular points in time (stocks)
• the economy’s balance sheet – a statement of its assets and liabilities (and thus
net worth) at one or more particular point
• Measure these activities and positions in a timely way to meet the
demand for robust statistics for informed decision making and policy
making, along with monitoring and evaluation of outcomes
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In macro-economic (and other) statistics
• Classify and aggregate detailed data using agreed classification and aggregation
systems
• To provide comprehensive, consistent, but condensed information to people and
institutions that want to use the information to:
• Monitor general economic performance
• Make rational economic decisions and monitor results
• Make informed policy, monitor progress
• Analyse how the economy works
• looking at how the pieces fit together and affect one another
• Evaluate the success of decisions and policies
• Including the monitoring of progress towards the SDGs

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Sustainable Development Goals
• Member countries of the United Nations adopted the 2030 Development
Agenda in September 2015
• including the SDGs and their targets
• and thus agreed to work towards the goals.
• SDGs are universal, all UN member states are expected to use these to frame
their agendas and government policies until 2030
• 17 goals, each has a set of targets and indicators to measure progress towards
the goal
• Countries need to develop these indicators, so there is an increasing demand
for statistics, including the Core Set, that are appropriate for measuring and
monitoring these goals
• Information about the SDGs, and their targets and indicators may be found at
the website of the UN Statistics Division https://unstats.un.org
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The Core Set of Economic Statistics
• Developed by ESCAP in consultation with its member economies
• A minimum set of economic statistics that countries should be able to
produce by 2020
• Countries may prioritise components as they develop policy plans
including those embodied in the SDGs
• The Regional Programme on Economic Statistics (RPES) is a platform
for economies to share resources and experiences
• Skill domains of statisticians identify the set of skills that statisticians
need to be able to produce the core set
• Further information on ESCAP’s RPES may be found on the ESCAP
website http://www.unescap.org
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What statistics are in the Core Set?
• Prices and costs
• Demand and output
• Income and wealth
• Money and banking
• Government
• Labour market
• Natural resources and the environment

• Further information on the Core Statistics may be found on the ESCAP website
http://www.unescap.org
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Skill domains for statisticians
• Economic survey skills (that is, associated classifications, SNA concepts in
surveys)
• Basic skills for price statisticians (that is, index number theory)
• Integrating household surveys into price statistics (that is, rebasing)
• ICT-enabled data analysis skills
• Quantitative measures (that is, volume measures –employment, labour,
production)
• The 2030 agenda for sustainable development
• The UN fundamental principles of official statistics
• Further information on the Skill Domains for Statisticians may be found
on the ESCAP website http://www.unescap.org and on the Fundamental
Principles at the UN Statistics Division website https://unstats.un.org.
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GDP and much, much more
• Changes in GDP (production and/or expenditure based) in volume
terms give information on growth rates
• a central statistic of the national accounts
• but other important information also arises from detailed GDP
estimates:
• information by industry and institutional sector
• other information about changing prices
• values and volumes
• And much more beyond GDP
• Also central are two measures of price changes – the CPI and the GDP
deflator
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The System of National Accounts (SNA 2008)
• An internationally agreed set of standards to measure economic activity
• Provides a framework that allows us to describe the economy’s many
transactors and transactions
• By organising (classifying) and condensing this information in a meaningful
way
• Following conventions based on economic principles
• With an agreed set of concepts, definitions, classifications and accounting
rules applying to all parts of the SNA system
• Giving rise to a comprehensive, consistent and integrated set of statistics
that record economic activities within given period and the levels of an
economy’s assets and liabilities at particular points of time
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SNA: General principles
• Comprehensive – all designated activities are covered, and a great
mass of detailed information lies ‘beneath’ the aggregated
information
• Consistent – the SNA has consistent rules for concepts, definitions,
classifications and accounting rules so that the same values are used
for recording all sides of a single transaction
• Integrated – all consequences of a single action are captured in the
accounts and balance sheets, so altogether the system is balanced
and closed

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Basic information identified in the accounts
• Who?
• Does what?
• Concerning what?
• With whom?
• For what purposes?
• When?
• How to measure?
• How does this affect the stocks of non-financial assets and the financial
assets and liabilities of the economy?
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The Main Structure of the Accounts
• Goods and services
• Sequence of accounts
• Current accounts
• Accumulation accounts
• Balance sheets
• Other accounts
• Supply and use tables
• Accounts in volume terms

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The goods and services account
uses resources
intermediate consumption output
final consumption expenditure imports of goods and services
gross capital formation  
gross fixed capital formations taxes on products
changes in inventories less subsidies on products
acquisitions less disposals of
 
valuables
exports of goods and services  

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Three measures of GDP
There are three different approaches to measuring GDP
• the production approach
• the expenditure approach
• the income approach

• Many data sources are used for estimating these different approaches
• This means there will be discrepancies among the three measures

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Accounts of the system
Measure three kinds of economic activities: production, consumption and
accumulation:
• Production
• providing the goods and services required by households, businesses, government and the
rest of the world
• Consumption
• satisfying wants and needs immediately
• using goods and services to produce more goods and services in the future
• Accumulation
• retaining goods, services and assets for future use; and/or
• incurring liabilities
• Focus in this course is on production, consumption and capital formation
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Current accounts of the SNA
production account
value added

generation of income account

operating surplus/mixed income

allocation of primary income account

balance of primary incomes

secondary distribution of income account redistribution of income in kind account

disposable income adjusted disposable income

use of disposable income account use of adjusted disposable income account

saving saving

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Capital and financial accounts and balance sheets

opening capital account other revalu- closing

balance changes ation balance
sheet in volume account sheet
net lending(+)/net account
borrowing

financial account

net worth net worth

net lending(+)/net
borrowing

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the integrated accounts – picture of the economy

Production

Generation,
allocation,
distribution, and use
of income

• Other changes in
Opening Stock Accumulation volume of assets Closing Stock
account

• • Net acquisitions of non-

Non-financial Assets • Revaluation
• Financial assets financial assets
• Net acquisitions of account
• Liabilities
• Net worth financial assets
• Net incurrence of
liabilities

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SNA: presentation
• Present time series in
• monetary values
• indexes
• growth rates
• Presentation as
• T-accounts
• matrix presentation (SUT)
• tables
• graphs give pictorial presentation of selected data

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Boundaries – what is included in an economy?
• National boundary – defines the residents of an economy
• It consists of all of the economic units that are resident in the
economic territory of a country
• An economic territory is the area under the effective economic
control of a single government
• An economic entity is resident in one and only one economic territory
determined by its centre of predominant economic activity

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Economic Units
comprise are grouped to

Institutional Units Institutional sectors

which can be partitioned into

Establishments, local Industries/

units, and kind-of-
Economic activities
activity units
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What is an institutional unit?
• Fundamental, decision-making unit in the statistical system
• Capable of owning goods and assets
• Incurring liabilities
• Engaging in economic activities and transactions with other units
• In its own right
• Legally responsible for its own actions
• May be :
• legal entities - corporations, non-profit institutions, government units
• households
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Flows and stocks
• Flows take place during a period of time
• involve creation, transformation, exchange, transfer or extinction of economic
value
• may arise through transactions or other events (called ‘other flows’)
• Stocks are measured at a point in time
• holdings of (called ‘positions in’) assets and liabilities
• recorded in balance sheets
• Stocks and flows are interlinked
• stocks result from the accumulation of previous transactions and other flows
• stocks are changed by transactions and other flows in each period

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Transactions
• Transactions show how goods, services, assets and liabilities are
exchanged between institutional units1 by mutual agreement
• Supply (domestic output, imports)
• Use (consumption, capital formation, exports)
• Distributive (such as compensation of employees, interest)
• Redistributive (such as taxes on income and wealth)
• Financial activity (bank deposits and loans, sale/purchase of shares)
• Usually but not always in monetary terms (barter, gifts)

1
sometimes, if it is analytically useful, we include transactions within a unit
(for example production for own consumption)
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Other flows
• Show changes to assets and liabilities that do not arise from
transactions
• May be due to:
• volume change (such as the economic appearance of assets,
catastrophic losses)
• price change (nominal holding gains or losses)

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Accounting rules
• Double or quadruple accounting entries
• record two transactions for each of the parties to a transaction
• Time of recording
• Accrual principle (at the time of change of ownership)
• Valuation (same for both parties to the transaction)
• market prices
• basic or producers’ prices for output
• purchasers’ prices for intermediate consumption
• current market value for assets and liabilities (for the balance sheet)

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Boundaries of the SNA
• Production boundary
• Consumption boundary
• Asset boundary
• Monetary and non-monetary transactions
• Included are:
• Legal and illegal activities
• Formal and informal activities
• Note: SNA does not impute transactions where none exist; sometimes
values are imputed for transactions without a monetary value

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Production boundary
• Include all goods that are produced (do not need to decide whether to
sell or use before production occurs)
• Include services provided to another, separate unit
• Exclude production of services for own final consumption within
households (decision to consume within the household is made before
production occurs)
• Except that rental services attributed to owner-occupied dwellings is
included
• Include goods and services provided free to other households or
collectively to the community
• Include legal and illegal activities, market and non-market, formal and
informal economy (and as much of the non-observed as is possible)
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Consumption boundary
• SNA differentiates acquisition, expenditure and use
• Expenditure – what is paid for
• Acquisition – may be purchased or free of charge
• Use – products obtained by households in one period may be used
over many periods (consumer durables) but are included in household
consumption when purchased
• Note:
• do-it-yourself activities by members of a household are excluded – the
purchase of materials is included in household consumption
• For owner-occupied dwellings, repairs and maintenance are intermediate
inputs into the production of the services
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Asset boundary
• An asset is a store of value that must be owned; the economic owner
accrues benefits from owning the asset
• Assets may be real or financial
• Liabilities are financial only
• Repairs and maintenance that keep assets in good working order are
not included in the asset boundary; but
• Major improvements, additions and so on, that improve an assets
performance or extend its working life are within the asset boundary
• Assets arise from prior transactions or other flows (including natural
resource assets)

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Guidelines for developing price indexes
• Price indexes provide information on changes in price levels over time
• SNA provides the framework and guidelines for building price indexes
that cover major economic activities, with:
• consistency of concepts and practical measurement; and
• coherence in terms of the definition, classification and measurement of flows
and stocks of goods and services
• Principal price indices in the system of economic statistics are the PPI,
the CPI, and the export and import price indices
• These are all indicators of macro-economic performance
• They may be used to deflate current price (value) estimates to give
volumes, and to reflate volume estimates to provide value estimates

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• PPIs:
• measure changes in the prices of domestically produced goods and
services following SNA concepts and definitions
• several pricing levels used in measuring domestic production – basic and
producer’s prices for output and producer’s prices for intermediate
inputs
• CPI:
• measures changes in the prices of goods and services that households
acquire (or use or pay for) for the purpose of consumption
• may be used as a macroeconomic indicator of inflation, as a tool
by governments and central banks for inflation targeting and for
monitoring price stability, and for deflation in the national accounts
• XMPIs:
• measure changes in prices of exported and imported goods and services

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Documentation is an essential part of the
work of statistical compilers.

This is how other compilers know what has

been done when they come to compile the
statistics (internal, detailed documentation)

And this is how everyone knows what is

contained in the published statistics (metadata)
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 SNA as a co-ordinating framework for
measuring the economy
observation of economic phenomena

basic economic statistics

manufacturing, construction, external sector, monetary and financial
prices and so on and government finance statistics

the System of National Accounts

production, income, consumption, capital formation, international trade,
SUT and analysis, employment, integrated sector accounts, external sector
statistics, financial transactions, balance sheets, and so on…

uses including building economic models, development and testing of

economic theories, macro- and meso-economic analysis

political and private decision making, also monitoring

and evaluating the results; international review of the economy
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Uses of national accounts and price indexes
• Providing input to informed decision making
• Monitoring and evaluating the results
• Macroeconomic analysis, forecasting
by both Government and the private sector
• Monitoring the behaviour of the economy over time – changes over
time are of interest
• Measuring progress towards achieving the SDGs – levels and changes
in GDP are both needed for the indicators
• International comparisons – often levels are of interest
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Links to other macroeconomic systems and
other statistics
• Other macro-economic datasets use the same framework
• External sector statistics
• Government finance statistics
• Monetary and financial statistics
• Labour statistics – use same classification systems
• Links to microdata
• Commercial accounting
• Satellite accounts

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Summary
• What is an economy?
• 2008 SNA as a framework for measuring economic activity
• concepts
• definitions
• boundaries
• classifications
• accounting rules
• And a tool for analysis
• Links to other macro-economic data sets and other statistics
• Comprehensive, consistent and integrated
• Uses and users of macroeconomic statistics
• Sustainable Development Goals (SDGs) and the Core Set of Statistics
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Exercise: in your national accounts
• Objective: to identify the concepts, definitions, boundaries and
classifications that you use in collecting and compiling your national
statistics.
• coverage – how is the national boundary defined and are all resident
units included?
• do you use the SNA accounting rules (valuation, time of recording)?
• do you use the international classifications?
• do you follow the production, consumption and asset boundaries? For
example, are informal sector activities included? Are illegal activities?
• Do you know of any deviations from the international standards of the SNA?
• Are deviations from the SNA identified in your metadata and your internal
documentation?

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