SNA 2008 Follow-Up: User Needs for Monetary and Financial Policy-Making

1. SDC/2008/168 SNA User Needs for Monetary and Financial Policy-making Steven KeuningDirector-General Statistics, ECB High Level Forum for the Long-Term Development of the SNA 17-18 November 2008, Washington D.C.

2. SNA 2008: immediate follow-up SNA user needs for Monetary policy-making Fiscal policy monitoring Financial stability assessment Five key issues in the further development of the national accounts SNA action plan Future SNA governance structure and issues for discussion Outline

3. SNA implementation phase in the coming years (2009 to 2014) EU countries according to the ESA revision and ECB legal acts Aligned implementation plans for other standards (BPM), at least in EU Regular (e.g. quarterly) compilation of global aggregates The ECB drafts various (parts of) chapters of the new ESA Financial transactions, balance sheets and other flows Financial institutional units and groupings of units Pensions European accounts The ECB as a compiler and user of national accounts Already reflect on future research agenda and governance Financial issues and their intertwinement with ‘real economy’ increasingly key The ECB/Central Banks partly involved in SNA 2008 process and governance ECB member of the UNSC (EU-delegation) and AEG, but not of ISWGNA Participation in various international committees and working groups Actively involved in drafting, commenting and consultation (on financial accounts) SNA 2008: immediate follow-up

4. Monetary policy-making … Economic analysis, monetary analysis, cross-check of outcome of economic analysis with that of monetary analysis, analysis of the channels through which monetary policy influences prices and economic activity, forecasting … requires: Complete set of fully consistent quarterly financial and non-financial sector accounts and balance sheets Accounting matrices with full from-whom-to-whom accounts (debtor-creditor principle), to analyse intersectoral transmissions/interactions/frictions Sub-sectoring of corporations (foreign/ public/private, SMEs) and households (type of income, financial position), because of their heterogeneous reactions Capturing financial innovation (true sales, synthetic securitisation; repos) Timely data, but also long time-series Close link with monetary data: implies minimal imputations and re-routings Review of contribution of financial capital as a production factor; SNA user needs for monetary and financial policy-making (i)

5. … and: Fiscal policy monitoring Both general government and public sector (specific set of accounts for non-financial and financial public corporations) Close link to accounting standards for the public sector Pensions Other social benefits (health, long-term care, social assistance) Structural reforms, privatisations, nationalisations Government provisions and contingencies (implicit liabilities, guarantees) as memo items SNA user needs for monetary and financial policy-making (ii)

6. Financial stability assessment SNA concepts and definitions do not entirely follow requirements for macro-prudential analysis (‘group’-consolidated accounts as satellite accounts?) However, core accounts still useful in assessing macroeconomic soundness Quarterly institutional sector accounts Macro-prudential indicators derived from financial balance sheets and transaction accounts (indebtedness or leverage of corporations) Accounting matrices (counterparty knowledge is crucial: impact of decisions of economic subsectors, e.g. to alter the level and composition of their portfolios, on the counterparty subsectors) Concept of institutional units and not of establishment units Supplementary data on multinationals Continental or even world-wide registers Holdings, SPVs, conduits SNA user needs for monetary and financial policy-making (iii)

7. Main purpose: macroeconomic communication, policies & research: Whole-economy perspective is key (at the micro-level: ‘costs are costs’, at the macro-level ‘costs can be receipts’ -> avoid the ‘fallacy of composition’) SNA to include inter-sectoral interactions (full matrix, beyond flow-of-funds) Core national accounts focus on measurable, monetary flows/stocks: Incomplete welfare concept, but key for economic & monetary policy-making Linkage to monetary flows (e.g. turnover) possibly to be strengthened Modern economies are mostly service- and not industry-oriented: Human capital as decisive production input: wages/employment by labour type Institutional unit much more relevant than establishment unit, even for production (differential access to finance, intangible capital): more subsectors (distributions matter), less attention to ISIC (economics is not engineering) Review treatment of risk (derivatives, off-balance sheet, FISIM) Economies are intimately interlinked, particularly financially: Rethink validity of concepts (e.g. reinvested earnings) in a globalised world Regular compilation of ‘consolidated’ accounts and continental/global accounts 5 Key issues in the further development of national accounts

8. Implementation Limited set of standard tables for all countries (implementing SDMX) Emphasis on (quarterly) integrated sector accounts and balance sheets Timeliness, consistency (market valuation) and from-whom-to-whom (accounting matrices); increasingly distinguishing relevant sub-sectors Standardised satellite accounts (environment, possibly unpaid labour) Additional tables according to regional/national needs (e.g. ESA) Regular compilation of world and (world-)regional accounts and indicators Research agenda (revising current SNA long-term research agenda) Complete coverage of key production factors (financial/non-financial capital, labour by type) and related productivity measures Units: is the establishment unit still meaningful? Role of multinationals, SPVs International linkages: can globalisation and ‘national’ accounts be reconciled? Production-income-revaluation split Risk-production split (derivatives, premiums, financial services, insurance) Asset boundary (intangibles, human capital, environment) and asset prices SNA action plan

9. Governance should reflect SNA user and compiler needs for monetary and financial policy-making Increasing importance of financial issues and financial services Revision process, seasonal and working-day adjustments Desirability of aligned international standards (SNA, ESA, BPM, GFS, MFS) ISWGNA: structure and process should reflect these needs Sufficient expertise required in sector accounts, particularly financial accounts Issues for discussion Five key issues in the further development of national accounts Implementing the research agenda (task forces on specific key issues?) Future governance structure and revision process (role of the ISWGNA) Future SNA governance structure and issues for discussion