National accounts

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National accounts or national account systems (NAS) provide a complete and consistent conceptual framework for measuring the economic activity of a nation (or other geographic area in the broader term social accounts). These include detailed underlying measures that rely on double-entry accounting. By construction such accounting makes the totals on both sides of an account equal even though they each measure different characteristics (Ruggles, 1987). Whilst sharing many common principles with business accounting, national accounts are firmly based on economic concepts.

National accounts broadly present the production, income and expenditure activities of the economic actors (corporations, government, households) in an economy, including their relations with other countries' economies, and their wealth. They present both flows during a period and stocks at the end of a period, ensuring that the flows are fully reconciled with the stocks. National accounts also include measures of the stocks and flows of financial assets and liabilities (commonly called "financial accounts" or "flow of funds" accounts).

There are a number of aggregate measures in the national accounts, most notably gross domestic product or GDP - which is the most widely used measure of aggregate economic activity in a period - disposable income, saving and investment. These aggregate measures and their development over time are generally of strongest interest to economic policymakers, although the detailed national accounts contain a rich source of information for economic analysis, for example in the input-output tables which show how industries interact with each other in the production process.

For example, in the United States the national income and product accounts (NIPA) provide estimates for the money value of income and output respectively per year or quarter, including GDP. NIPA entries are called flows, to indicate that they are measured over time. Another application is the national balance sheet as to assets on one side, including the capital stock, and liabilities and wealth on the other, measured as of the end of the accounting period. Entries here are called stocks, to indicate their accumulation to a point in time, as distinct from a flow, which is measured over time.

National accounts can be presented in nominal from real amounts, that is, correcting money totals for price changes over time (Sen, 1979; Usher, 1897). Economic growth rates (most commonly the growth rate of GDP) are generally measured in real (constant price) terms.

The accounts are derived from a wide variety of statistical source data including surveys, administrative and census data, and regulatory data, which are integrated and harmonised in the conceptual framework. They are usually compiled by national statistical offices and/or central banks in each country, though this is not always the case, and may be released on both an annual and (less detailed) quarterly frequency.

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[edit] Development

The original motivation for the development of national accounts and the systematic measurement of employment, was the need for accurate measures of aggregate economic activity. This was made more pressing by the Great Depression and as a basis for Keynesian macroeconomic stabilisation policy and wartime economic planning. The first efforts to develop such measures were undertaken in the late 1920s and 1930s, notably by Colin Clark and Simon Kuznets. Richard Stone led later contributions. The first formal national accounts in the United States were in 1947 (Ruggles, 1987, p.377), with national accounts developed in many European countries over the 1940s and early 1950s.

International rules for national accounting are defined by the United Nations System of National Accounts, which is currently under update. In Europe the worldwide System of National Accounts has been transposed into a European System of Accounts (ESA), which is applied by members of the European Union and many other European countries.

[edit] Main components

The presentation of national accounts data may vary by country (commonly, aggregate measures are given greatest prominence), however the main national accounts include the following accounts for the economy as a whole and its main economic actors.

  • Current accounts:
production accounts which record the value of domestic output and the goods and services used up in producing that output. The balancing item of the accounts is value added, which is equal to GDP when expressed for the whole economy at market prices and in gross terms;
income accounts, which show primary and secondary income flows - both the income generated in production (e.g. wages and salaries) and distributive income flows (predominantly the redistributive effects of government taxes and social benefit payments). The balancing item of the accounts is disposable income ("National Income" when measured for the whole economy);
expenditure accounts, which show how disposable income is either consumed or saved. The balancing item of these accounts is saving.
  • Capital accounts, which record the net accumulation, as the result of transactions, of non-financial assets; and the financing, by way of saving and capital transfers, of the accumulation. Net lending/borrowing is the balancing item for these accounts
  • Financial accounts, which show the net acquisition of financial assets and the net incurrence of liabilities. The balance on these accounts is the net change in financial position.
  • Balance sheets, which record the stock of assets, both financial and non-financial, and liabilities at a particular point in time. Net worth is the balance from the balance sheets (United Nations, 1993).

The accounts may be measured as gross or net of consumption of fixed capital (a concept in national accounts similar to depreciation in business accounts).

[edit] References

  • D. Usher. (1987), "real income," The New Palgrave: A Dictionary of Economics, v. 4, p. 104.

[edit] See also

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