Introduction to the SNA, advanced
Lesson 8
The 2008 SNA compared with
balance of payments (BPM)
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1
Background
• The International Monetary Fund’s Balance of Payments
Manual (or BPM) provides the framework for compiling
balance of payments and related statistics
• The BoP is a critical source of data for the national accounts
– the accounts for the RoW sector are completely
dependent on the data from the BoP
• Historically, the BoP and the SNA were broadly consistent but
there were several differences
– most differences were eliminated when the 1993 SNA and
the fifth revision of the Balance of Payments Manual
(BPM5) were released and this process was completed
with the release of the 2008 SNA and the BPM6
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The balance of payments (BoP)
• Like the SNA, the BoP records details of economic transactions
within a framework of accounting rules relating to the time of
recording transactions, their valuation and who the relevant
transactors are
• The concept of residence is critical for the BoP because it
records transactions between residents and non-residents
and so they need to be precisely defined
– the definition of residence is identical between the SNA
and BPM6
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Terminology
• Despite the consistency between the concepts, valuation etc,
both the SNA and BPM have largely retained the terminology
that each has developed over the past few decades
• We saw earlier that the SNA refers to “Uses” and “Resources”
as the headings for the columns in its accounts
– the equivalents in the BoP are called “Credits” and “Debits”
respectively, although viewing the transactions from opposite points
of view (the home country by the BoP and the rest of the world in the
national accounts) confuses the issue
•
The “current account balance” is a very important data item
in the BoP
– it is called the “current external balance” in the SNA’s Use of
disposable income account
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Terminology (continued)
• There are three current accounts in the BoP
– the goods and services account
– the primary income account
– the secondary income account
• The BPM6 has no equivalent accounts for the SNA’s
production account, the generation of income account and
use of income account
– the international accounts do not describe production, consumption
or capital formation
• The Primary income account corresponds to the Allocation of
primary income account in the SNA
• The Secondary income account is called the Secondary
distribution of income account in the SNA
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Current accounts
• The main features of the BoP current accounts correspond to
those in the current accounts in the SNA
– each distinguishes between goods and services
– each distinguishes current from capital transfers
• The balance of payments distinguishes between goods and
services because of the policy interest in this distinction
• The BoP and the SNA present their accounts differently
– the national accounts shows details of Uses and Resources and then
the reconciliation between them as a balancing item under “Uses”,
which is carried through to the following account as a “Resource”
– the BoP shows details under “Credits” and “Debits” and also shows
totals for each account and then the balance
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BoP double entry accounting
• Every transaction is represented in the BoP statement with
two entries (credit and debit)
• This table presents examples of the types of items entered
under the “Credits” and “Debits” headings
CREDITS
DEBITS
Exports
Income receivable
Imports
Income payable
Transfers receivable
Increase in liabilities
Disposal of (decrease in)
assets
Transfers payable
Reduction in liabilities
Acquisition of (increase in)
assets
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BoP double entry accounting (continued)
Current accounts
Credits
Debits
Balance
Goods and services account
Goods
462
392
78
107
540
499
6
2
Interest
13
21
Distributed income of corporations
17
17
Reinvested earnings
14
0
50
40
10
590
539
51
Services
Goods and services
41
Primary income account
Compensation of employees
Primary income
Goods, services and primary income
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BoP double entry accounting (continued)
Current accounts
Credits
Debits
Balance
(From previous slide)
Goods, services and primary income
590
539
Current taxes on income, wealth
1
0
Net non-life insurance premiums
2
11
12
3
Current international transfers
1
31
Miscellaneous current transfers
1
10
17
55
51
Secondary income account
Non-life insurance claims
Secondary income
Current account balance
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Financial account
• The BPM’s Financial account corresponds to part of the
accumulation accounts in the SNA
– it is particularly concerned with financial instruments
– the main classification is into assets and liabilities
• There is a functional split within each of assets and liabilities
– direct investment
– portfolio investment
– financial derivatives
– other investment
– reserve assets
• The assets and liabilities are also classified by type of
instrument
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International investment position
• The BPM’s international investment position (IIP) is a
statement showing the stock of an economy’s foreign financial
assets and liabilities
• The IIP shows details of
–
–
–
–
claims on non-residents
liabilities to nonresidents
monetary gold
special drawing rights (SDRs)
• The net IIP is the net position at a point in time (the end of an
accounting period such as a year)
• Changes in the IIP reflect changes in an economy’s external
positions due to flows, price changes, exchange rate changes
and other changes
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SNA’s balance sheet equivalent of the IIP
• The IIP is a subset of the assets and liabilities included in the
national balance sheet
• In addition to the IIP, the SNA’s national balance sheet shows
non-financial assets as well as financial assets and liability
positions between residents
• A country’s net worth is defined as its stock of non-financial
assets plus its net international investment position
– the net worth of a unit (or person, or sector, or country) is
defined as the value of all the assets owned less the value
of all outstanding liabilities
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Data links between SNA and BoP
• A number of important aggregates in the national accounts
depend on the accuracy and consistency of the BoP data as
well as the data from the national accounts themselves
• The supply–use table was described in detail in the Part 1
• The basic identity was that supply = use, where
Supply = output + imports, and
Use = final consumption (households and government) +
investment + exports + intermediate consumption
• We can use symbols to show these as follows:
Supply = Use, so O + M = C + I + X + IC
• Rearranging these, we obtain O – IC = C + I + X – M
• Output less intermediate consumption = GDP, so C + I + X – M
must also equal GDP
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Data links between SNA and BoP (continued)
• From the previous slide we saw that
GDP = C + I + X – M
• Gross national disposable income (GNDY) is GDP plus net
primary and secondary income from abroad, so:
GNDY = GDP + BPI + BSI
where BPI = balance on primary income
and BSI = balance on secondary income
• By substitution from the equation above, we obtain
GNDY = C + I + X – M + BPI + BSI
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Data links between SNA and BoP (continued)
• Gross national disposable income (GNDY) is GDP plus net
primary and secondary income from abroad
GNDY = C + I + X – M + BPI + BSI
• The current account balance is the sum of the balances from
the three BoP current accounts, i.e. CAB = (X – M) + BPI + BSI
• By substitution in the first equation above we can see that
GNDY = C + I + CAB
• The SNA defines gross saving as GNDY less final consumption
i.e. S = GNDY – C
• Therefore S = (C + I + CAB) – C, which collapses to S = I + CAB
• Rearranging these terms gives CAB = S – I, which shows the
BoP’s current account balance is equal to the gap between
saving and investment in the national accounts
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References
• System of National Accounts, 2008 (Chapter 26 describes the
Rest of the world sector in detail)
• Balance of Payments and International Investment Position
Manual, Sixth Edition (BPM6)
• Standard International Trade Classification (SITC), Revision 4
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