MACROECONOMIC STATISTICS

MACROECONOMIC STATISTICS

MACROECONOMIC STATISTICS

Sponsored by a Grant TÁMOP-4.1.2-08/2/A/KMR-2009-0041 Course Material Developed by Department of Economics,

Faculty of Social Sciences, Eötvös Loránd University Budapest (ELTE) Department of Economics, Eötvös Loránd University Budapest

Institute of Economics, Hungarian Academy of Sciences Balassi Kiadó, Budapest

MACROECONOMIC STATISTICS

Author: Gábor Oblath

Supervised by Gábor Oblath January 2011

ELTE Faculty of Social Sciences, Department of Economics

MACROECONOMIC STATISTICS

Week 5

External and internal

balance/imbalance: conceptual and measurement issues

Part I

Gábor Oblath

Outline

Part I

• Conceptual issues

• Interpreting and applying BOP statistics for analyses

Part II (see Week 6)

• The relative size of external deficits

– ”Dark matter”?

– International comparisons

• Decompositions

Interpreting external balance/imbalance

• Flows?

– Trade balance – Current account – NL/NB

– Overall balance (dR)

(J. Meade: distinction between ”autonomous” vs.

”accommodating” transactions – is this applicable?)

• Changes in stocks?

– dNFA [-dNFL]= IIP = net national wealth (FA) –>

• Valuation effects

• Portfolio decisions

Theories on the BOP: balances explained  where do they ”draw the line?”

BOP Theories/approaches X–M

=NX

+NFI+NFTc

=CA +NFTk

=NL

+FINA+NEO

=dR

intertemporal, twin deficits

monetary approach portfolio-, FDI-theories

According to the current view

• Stocks and changes in stocks matter

• Beside current financing needs:

– Relative size and composition of net foreign liabilities (NFL)

– dNFL

– Thus: valuation effects also matter

(Lane & Milesi-Ferretti)

NFL/GDP

-20 0 20 40 60 80 100 120

EST HU CR LAT PO BG LI SK RO CZ SL NFDI

NFDebt NFL

Source: Lane–Milesi-Ferretti (2006)

Interpretation of BOP statistics

• Identities

• Information from the BOP for

analysis

The change in international reserves is the only fix point (dR)

• CA + KA + FINA + NEO = dR

• (CA + KA + FINA + NEO – dR = 0) Rearrangements: NL=

• CA + KA = -(FINA – dR + NEO)  ”From above”

• CA + KA + NEO = -(FINA - dR)  ”From below”

NEO is the error term for the whole BOP

• CA + KA + dR = -(FINA+ NEO)

• NEO = dR – (CA+KA) – FINA

Numerical example

CA+KA+FinA+NEO-dR

CA+KA FinA dR NEO sum

1. -100 100 0 0 0

2. -100 80 -10 10 0

3. -100 120 40 20 0

4. -100 100 -50 -50 0

Decomposition: dNFA (a)

dNFA(debt)

dNFA = dFA – dFL

dFA(debt)

dFA(eq)

dFL(debt)

dFL(eq)

–

–

dNFA(eq) Transactions + revaluation + others

Decomposition: dNFA (b)

dNFA = dFA – dFL

dFA(non_fdi)

dFA(fdi)

dFL(non_fdi)

dFL(fdi)

dNFA(non_fdi)

–

dNFA(fdi) Transactions + revaluation + others

dNFA from the domestic side

• dNFA – [(KG +other volume) + NEO] = CA + KA

 S – I +KT =

= (Sg +KTg – Ig) + (Sp +KTp – Ip)

KT: capital transfer; S: savings; I investment; g, and p:

government and private

Information based on BOP: examples from Hungarian data

(In percent of GDP)

• [d(nfa) = -d(nfl)]

• Decomposition

– Current (+”capital”) transactions vs. others – Composition of current transactions

• Financing and financial flows

– FDI vs. non-FDI; debt vs. non-debt – Gross vs. net

• Stocks

– FA, FL, NFL – Composition

(a) d(nfa)

• nfa ₁ -nfa ₀ = d(nfa)–nfa ₀ [(y/(1+y)]

• (nfl = –nfa)

• d(nfa)= transactions + revaluations + others

• Transactions: dR–FINA=

CA+KA+NEO

dR-FINA-NEO = CA+KA

”from below” ”from above”

Nfl1–nfl0 = d(nfl)–nfl0 [(y/(1+y)]

HU: 1996–2009

-15%

-10%

-5%

0%

5%

10%

15%

20%

1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

d(nfl) -nfl0*y/(1+y)

=nfl1-nfl0

-5%

0%

5%

10%

15%

20%

1996. 1997.

1998. 1999.

2000. 2001.

2002. 2003.

2004. 2005.

2006. 2007.

2008. 2009. d(nfl)

nfl0(y/1+y)

d(nlf) =transactions vs. kg+other kg: revaluation/GDP

-20%

-15%

-10%

-5%

0%

5%

1996. 1997.

1998. 1999.

2000. 2001.

2002. 2003.

2004. 2005.

2006. 2007.

2008. 2009. tranzakciók kg

d(nfa)

(+others)

-12,0%

-10,0%

-8,0%

-6,0%

-4,0%

-2,0%

0,0%

2,0%

4,0%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

NEO CA+KA CA+KA+NEO

Transactions (nl ”from below”= ca+ka+neo)

nl (”from above”) = ca+ka

and components : NX, NFI, NFTC, NFTK

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

1995. 1996.

1997. 1998.

1999. 2000.

2001. 2002.

2003. 2004.

2005. 2006.

2007. 2008.

2009. CA+KA

NXgs NFI NFTC+NFTK

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

NFTC+NFTK NFI NXgs CA+KA

(b) Financing: Financial transactions

• Financial account (FINA)

– FINA= CA+KA+NEO – dR, vagy – (FINA+NEO)= CA+KA – dR

• Balance

• Composition

(b/1) Finacing in % of GDP -fina=(ca+ka–neo)–dr

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

CA+KA+NEO=

-FINA+

dR

From another point of vew – (fina+neo)=(ca+ka)–dr

-20%

-15%

-10%

-5%

0%

5%

10%

15%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

-(FINA+NEO) CA+KA dR

(b/2) Composition of financing fdi vs. non-fdi; debt vs non-debt

-2,0%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fdi(bruttó) fdi(nettó)

nem adóssággeneráló(bruttó) nem adóssággeneráló(nettó)

Gross FDI Net FDI

Non-debt (gross) Non debt (net)

fdi vs. non-debt (gross)

-2,0%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fdi(bruttó)

nem adóssággeneráló(bruttó)

Non-debt vs. debt

-5,0%

0,0%

5,0%

10,0%

15,0%

20,0%

25,0%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

nem adóssággeneráló(bruttó) adósság (bruttó)

-10%

-5%

0%

5%

10%

15%

20%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

nem adóssággeneráló(nettó) adósság (nettó)

non-debt (gross) vs.debt (gross) non-debt (net) vs.debt (net)

(c) Stocks/GDP

• nfl = (fa – fl)

NFL/GDP (nfl = fl – fa)

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

200%

220%

1995. 1996.

1997. 1998.

1999. 2000.

2001. 2002.

2003. 2004.

2005. 2006.

2007. 2008.

2009. fa

fl nfl

FDI/GDP (fdi)

Liabilities, assets (net) – equity and debt

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fa(fdi) fl(fdi) nfl(fdi)

0%

10%

20%

30%

40%

50%

60%

70%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fa(fdi_eq) fl(fdi_eq) nfl(fdi_eq)

0%

5%

10%

15%

20%

25%

30%

35%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fa(fdi_debt) fl(fdi_debt) nfl(fdi_debt)

fdi vs. equity*/

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fa(fdi) fl(fdi) nfl(fdi)

0%

10%

20%

30%

40%

50%

60%

70%

80%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fa(eq) fl(eq) nfl(eq)

Gross and net foreign debt/GDP

a) FDI with „other capital” b) without it

0%

20%

40%

60%

80%

100%

120%

140%

160%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fa(debt1) fl(debt1) nfl(debt1)

0%

20%

40%

60%

80%

100%

120%

140%

160%

1995. 1996. 1997. 1998. 1999. 2000. 2001. 2002. 2003. 2004. 2005. 2006. 2007. 2008. 2009.

fa(debt2) fl(debt2) nfl(debt2)