Conference The Accounts of Society National Accounts at the Service of Economic and Monetary Policy Making Luxembourg, Alvisse Parc Hotel 12‐13 June 2014 Abstracts & Faculty CV Eurostat Conference The Accounts of Society National Accounts at the Service of Economic and Monetary Policy Making Luxembourg, Alvisse Parc Hotel - 12‐13 June 2014 National Accounts at the Service of Economic and Monetary Policy Making Jørgen ELMESKOV: National Accounts - continuously struggling to catch-up with economic reality and policy needs Abstracts The switch to ESA2010 is a major achievement. However, national accounts still face a number of challenges, some of which have policy implications. Challenges include how to appropriately treat globalization of economic activity; dealing with the price-volume split of activity in the services sector, including public sector services; considering the relation between fiscal rules and changes in GDP definitions; deciding when investment should be treated as investment; and considering the way asset-price valuations enter the national accounts. Werner BIER: Use of National Accounts for the purpose of the ECB’s monetary policy National accounts provide an important information basis for the ECB’s monetary policy. They constitute a comprehensive and consistent framework for the analysis of economic and financial developments. The presentation illustrates how national accounts support the ECB in conducting its monetary policy. It focuses on their analytical relevance and methodological advantages, as well as on the various enhancements that the introduction of ESA 2010 brings for ECB purposes. By way of example, the Euro Area Accounts is presented as a tool for cross- checking non-financial and financial developments, including monetary developments, in an integrated, economic-sector-based approach. Björn DÖHRING: Using National Accounts data to underpin the European Commission’s economic policies National Accounts data, and indicators derived from National Accounts, are central to the economic policy work of the European Commission. Their use range from strictly administrative, quasi-mechanical applications to sophisticated analytical purposes. We will briefly touch on the role of national accounts data in EU Economic Governance, in particular the Stability and Growth Pact and the Macroeconomic Imbalances Procedure, and the European semester of economic policy coordination, in order to deduct from that the key needs with respect to national accounts in general, and the new ESA 2010 in particular. 3 Eurostat Conference The Accounts of Society National Accounts at the Service of Economic and Monetary Policy Making Luxembourg, Alvisse Parc Hotel - 12‐13 June 2014 Martin WEALE: National Accounts, Economic Analysis and Policy-making: National Accounts - a Global View of the Crisis? Three Illustrative Examples Brent R. MOULTON: The 2007-2009 Financial Crisis and Recession: The paper briefly discusses the origin of national accounts, paying Reflections in the National Accounts particular attention to contributions from the United Kingdom. The first example of economic analysis is the use of national accounts by The financial crisis of 2007–2009 led to a global recession that impacted Abstracts Gregory King to explore the economic effects of the War of the League Abstracts almost all of the major developed countries. This paper uses the national of Augsburg, and estimate the date beyond which the belligerents would accounts data for OECD countries to describe some of the main features of be unable to finance the war. The second example looks at the UK’s the Great Recession. In terms of gross domestic product, the predominant current external position, using the discrepancies between the income pattern was a sharp decline for several quarters followed by a slow, account and balance sheet to produce plausible estimates of underlying sluggish recovery, but there were notable variations between countries net income from abroad and thus a sustainable trade balance. The third in the extent of the downturn and the speed and extent of recovery. The example focuses on growth accounting and the UK productivity puzzle. national accounts also allow us to compare the effects on saving, net The importance of integrating growth accounts and conventional lending or borrowing, and on balance sheets. The paper concludes with national accounts is discussed. Finally reference is made to the fact that a discussion of some of the data gaps that were exposed by the crisis— national accounts have probably not proven to be as helpful a tool for relevant information that policy makers would like to have had, but which economic modelling as had been hoped when the accounting structures the national accounts were unable to provide. It also discusses some of were devised. the steps that are being taken to address these measurement gaps. Moreno DA PONT: Improving data quality for large enterprises through profiling and coherence analysis – benefits for national accounts Large and complex businesses account for a significant portion of economic production in many economies and accurately measuring the ever changing activities of these businesses is extremely challenging for statistical agencies. In this talk, I will describe the approach taken by Canada to maintain the economic survey frame for large and complex businesses and will discuss how the approach benefits survey programs and the Canadian System of National Accounts. In addition, I will describe some of the processes undertaken to ensure that varied data reported by large business respondents are coherent. Finally, I will discuss benefits associated with establishing direct relations with large and complex businesses, based on the Canadian experience. 4 5 Eurostat Conference The Accounts of Society National Accounts at the Service of Economic and Monetary Policy Making Luxembourg, Alvisse Parc Hotel - 12‐13 June 2014 John KAY: The quest for the bezzle: imaginary wealth in national accounts GDP and Beyond - Household & Environmental Aspects In his book The Great Crash about the Wall Street crash of 1929, John Peter van de VEN: The Value Added of Analysing Households? Kenneth Galbraith coined the term ‘bezzle’ to describe the illusory wealth which exists when an embezzler has stolen money but the victims have In 2010, the report of the “Commission on the Measurement of Economic not yet discovered their loss. More recently, Warren Buffett’s partner, Performance and Social Progress” (CMEPSP), better known as the Stiglitz- Abstracts Abstracts Charlie Munger, used the word ‘febezzle’, functionally equivalent bezzle, Sen-Fitoussi report, was published. The commission included twelve to describe the similar, but legal, creation of imaginary wealth through recommendations on the measurement of societal well-being, among varieties of financial engineering. which five related to the measurement of households in the system of In this talk, I will analyse the sources of ‘febezzle’ and its central role in national accounts: recent events, including the financial crisis of 2008, and explain how this • When evaluating material well-being, look at income and consumption distorted the level and time path of both corporate and national accounts rather than production. data over the first decade of the current millennium. • Emphasize the household perspective. • Consider income and consumption jointly with wealth. • Give more prominence to the distribution of income, consumption and wealth. • Broaden income measures to non-market activities. The presentation will mainly discuss the initiatives and the (future) research related to the first three recommendations (emphasising the household perspective), the fourth recommendation (distribution of income, consumption and wealth) and the fifth recommendation (non- market activities). Doing so, the value added, in the sense of providing additional insights for policy and the public at large, will be evaluated. It will be concluded that the true value added lies in the availability and further analysis of distributional information. It will also show that focusing on e.g. real household disposable income may indeed rightly change the focus of national accounts and provide additional insights in the shorter run; in the longer run, however, it will become clear that – apart from some very specific circumstances – the trend development of disposable income cannot and does not structurally deviate from economic growth. Finally, it will be argued that the full inclusion of unpaid activities and/or leisure time in the accounting framework of national accounts will only come at the cost of moving away of common perceptions of income, and may provide counterintuitive and perverse results. 6 7 Eurostat Conference The Accounts of Society National Accounts at the Service of Economic and Monetary Policy Making Luxembourg, Alvisse Parc Hotel - 12‐13 June 2014 Jock MARTIN: Data and accounting needs for European environmental Pedro DIAZ MUNOZ: Environmental Accounts - the European Perspective assessments Eurostat will present the legal framework recently developed on The 2050 vision at the heart of European environmental policy focusses on environmental accounts. This includes 6 modules on material flow accounts, achieving long-term sustainability through a low-carbon, circular economy air emissions accounts, environmental taxes, energy flow accounts, where nothing is wasted and where natural resources are managed environmental goods and services sector and environment