The System of National Accounts and
Policy Development
with a special focus on Fiscal Policy
November 17, 2008
2003-4 CSNA RP Toolkit
Outline of Presentation
 There are three key elements in the title of my
presentation:
• Policy Development
• Fiscal Policy, and
• National Accounts
 I will first deal with them individually
 Specifically, the questions are:
• What is the goal of policy development?
• Where does fiscal policy fit in?
• What does this imply for the SNA?
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2016-07-23
2003-4 CSNA RP Toolkit
Goal of Policy Development
 Improve the well-being of citizens
 To achieve this, the policy suite may include:
•
•
•
•
•
•
fiscal policy
monetary policy
tax policy
financial policy
labour market policy
environmental policy
 Each policy has a direct focus on its principal domain but
there are secondary consequences on many other
domains
 By necessity, many of the consequences of policy
change, particularly the secondary ones, are understood
and taken into account only qualitatively
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2016-07-23
Impact of Policy on Well-Being
Well-Being
W1
W2
Economic
Financial
Financial
Policy
Measured
Output
Fiscal,
Monetary,
Tax,
Transfers
W3
Social
Environmental
Labour
Other
Environment
Other
Unmeasured
Output
National Accounts
(GDP)
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2016-07-23
Key Observations
 GDP is not even a comprehensive measure of
economic output
 National Accounts are used by policies other
than fiscal
 There is dependence among economic policy
levers
• e.g. inefficient use of financial policy may impose an
additional burden on fiscal policy or other economic
policies
 Fiscal policy only operates on measured output
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2016-07-23
Fiscal Policy’s Precise Role
• Fiscal Policy’s direct focus is economic stabilization
 OECD Economic Surveys involve assessment of a country’s
fiscal stance and risks for the near to long term, including the
complimentarity of fiscal and monetary policies
 The IMF web site has many references to debates about
“rules-based fiscal policy” and the use of fiscal poilcy for
short run stimuli
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2016-07-23
How Does Fiscal Policy Stabilize
the Economy?
 The focus is on Change in GDP, rather than level
 The Change in GDP automatically affects:
•
•
•
•
revenues
expenditures
budget balances
debt levels
 The relationship between the change in GDP and
changes in fiscal levers may lead a government to take
proactive stance beyond automatic stabilizers
 Changes in fiscal policy affect GDP:
• largely through changes in demand in the short to medium term;
and
• over the longer run, through changes in supply
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2016-07-23
How Does Fiscal Policy Stabilize
the Economy?
 However, in taking appropriate decisions, fiscal
policy further requires that:
• the output change data be available on a timely basis
and that they are trustworthy, and not be revised
qualitatively
 Revisions not only raise questions of whether
policy was used appropriately or not
• they also can have a huge impact on fiscal variables
• in Canada, a 1 percentage point revision in GDP
results in a $3 billion revision in the fiscal balance (the
current surplus in 2008 is $2 billion)
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2016-07-23
Other Uses of National Accounts
 Beyond the focus of GDP Change, there is also interest
on GDP level for other policy or policy instruments e.g.
• the Canadian equalization program
• productivity level determination and comparison
 This raises some interesting/important issues:
• Do technical improvements in GDP level measurement also
affect estimation of GDP change?
• Do such improvements affect timing of National Accounts data
releases?
• Do such improvements affect the degree of revisions to data?
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2016-07-23
Conclusion
 From a fiscal policy perspective, SNA revisions should
focus on:
• the quality of quarterly change in GDP
• timing of quarterly releases
• need for data revisions
 Hence there’s a need to incorporate above factors in
addition to appropriate level of GDP, as considerations
for SNA revision
 Other components of well being are better captured and
more useful outside the SNA framework
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2016-07-23