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Institutional units and Institutional sectors

Institutional units and Institutional sectors. Peter van de Ven Head of National Accounts, OECD. NBS-OECD Workshop on National Accounts Guangzhou, December 2 – 5, 2014. Defining institutional units and institutional sectors Delineation between market and non-market

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Institutional units and Institutional sectors

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  1. Institutional units and Institutional sectors Peter van de Ven Head of National Accounts, OECD NBS-OECD Workshop on National Accounts Guangzhou, December 2 – 5, 2014

  2. Defining institutional units and institutional sectors Delineation between market and non-market Delineation between general government and Non-profit Institutions Serving Households (NPISHs) Some specificities of general government Some specificities of households Some specificities of financial corporations Overview of the institutional sector accounts Concluding remarks Introduction

  3. Institutional sector: grouping of institutional units Definition of institutional unit: Entitled to own goods or assets in its own right Able to take economic decisions Able to incur liabilities on its own behalf Complete set of accounts, including balance sheets Two main types of institutional units Households Units with independent legal status: legal or social entities Note: quasi-corporations, notional resident units, subsidiaries of non-resident units Definition of institutional unit

  4. Groupings based on functions in the economy S.11: Non-financial corporations: Corporations principally engaged in the production of non-financial market goods and services S.12: Financial corporations: Corporations principally engaged in the production of financial market services S.13: Government: Institutional units engaged in the production of non-market goods and services, and redistribution of income S.14: Households: (Groups of) persons who share the same living accommodation, includingunincorporated enterprises S.15: NPISHs: Non-profit institutions producing non-market goods and services, not controlled by government S.1: Total economy S.2: Rest of the World: Not a sectors, covers all transactions and positions with non-residents Main institutional sectors

  5. Institutional units not always that clear cut: Legal unit, enterprise, enterprise group? Holdings, head offices, SPEs? Delineation of quasi-corporations? Often based on practical considerations May hamper international comparison Institutional unit clear cut?

  6. Consolidation effect for liabilities in loans of non-financial corporations, in % of GDP Consolidation impact across countries

  7. Operating surplus as % of value added at factor costs, non-financial corporations Profit shares across countries

  8. Delineation market vs. non-market (1) • Principal function government: provision of goods and services to the community or to individual households and to finance their provision out of taxation or other incomes, to redistribute income and wealth by means of transfers, and to engage in non-market production(SNA 2008, para. 4.117); controlled by government • Provision of collective services • Provision of individual services free or at price that are not economically significant • Transfers related to redistribution of income and wealth • Principal function NPISHs: provision of goods and services to households and to finance their provision out of subscription, transfers and/or donations, and to engage in non-market production; not controlled by government • Note: Not all non-profit institutions are NPISHs

  9. Delineation market vs. non-market (2) • Primary government units (central administration)rather straightforward • Classification of extra budgetary units (and other NPIs): • Criterion 1: Separate institutional unit? • No => consolidation with primary unit • Yes => continue • Criterion 2: Market or non-market producer? • Market => classification as non-financial or financial corporation • Non-market => continue • Criterion 3: Controlled by government? • No => classification as NPISH • Yes => classification as general government unit

  10. Delineation market vs. non-market (3) • Non-market output: goods and (individual or collective) services produced by non-profit institutions serving households (NPISHs) or government that are supplied free, or at prices that are not economically significant, to other institutional units or the community as a whole (SNA 2008, para. 6.128) • Economically significant prices: prices that have a significant effect on the amounts that producers are willing to supply and on the amounts purchasers wish to buy (SNA 2008, para. 6.95) • Privately owned corporations => market (few exceptions) • Public corporations (and NPIs): 50%-criterion (sales > 50% of production costs), but … • … suppliers of services to general government • Institutional set-up may have significant impact

  11. Delineation general government vs. NPISHs • Criterion 3: Controlled by government? • No => classification as NPISH • Yes => classification as general government unit • Control: The ability to determine the general policy or programme (SNA 2008, para. 4.92 – 4.93) • Possible indicators: • Appointment of officers • Other provisions of enabling instruments • Contractual agreements • Degree of financing • Risk exposure

  12. Breakdown of non-financial corporations and financial corporations by ownership/control: Public corporations National private corporations Foreign controlled corporations Further breakdown based on control

  13. Further breakdown of government: Central government State government Local government Social security funds Public sector: general government plus public corporations (corporations owned and/or controlled by government) Some specificities of government

  14. Measurement of non-market output No market price for services of government (and NPISHs) Alternative: estimate value of output by applying a method to arrive at a market equivalent price Sum of costs: Intermediate consumption Compensation employees Consumption of fixed capital Other taxes less subsidies on production (Mark-up for profits = return on capital investments) Some specificities of government (and NPISHs)

  15. Government (and NPISHs) consumes its own services Final consumption of government (and NPISHs) = Output of government (and NPISHs) minus Own-account production of investment goods minus Sales of goods and services plus Goods and services purchased from market producers for delivery to households free or at economically insignificant prices Volume measurement? Measurement of non-market output

  16. Includes unincorporated enterprises (except quasi-corporations) Production of goods and services for own final use: Production of goods included (e.g. subsistence farming in developing countries) Owner-occupied housing included Rationale: international comparability However: production of (other) unpaid services within households not included Value added broken down into compensation of employees, other taxes less subsidies on production, and mixed income Some specificities of households

  17. Further breakdown of financial corporations: S.121: Central Bank S.122: Deposit-taking corporation, excluding Central Bank S.123: Money market funds (MMF) S.124: Non-MMF investment funds S.125: Other financial intermediaries, excluding insurance corporations and pension funds S.126: Financial auxiliaries S.127: Captive financial institutions and money lenders S.128: Insurance corporations S.129: Pension funds Some specificities of financial corporations

  18. Not Total NFC FC GOV HH NPISH ROW Total sectorized economy S.11 S.12 S.13 S.14 S.15 S.1N S.1 S.2 S.1 + S.2 Resources: Output (basic prices) 609,1 51,5 89,8 115,1 4,9 - 870,4 - 870,4 Taxes less subsidies on products - - - - - 50,8 50,8 - 50,8 Total 609,1 51,5 89,8 115,1 4,9 50,8 921,2 - 921,2 Uses: Intermediate consumption 346,0 25,2 33,1 48,9 2,8 - 456,0 - 456,0 B1g = Gross domestic product (mp) 263,1 26,3 56,7 66,2 2,1 50,8 465,2 - 465,2 Consumption of fixed capital 37,3 5,2 11,4 15,3 0,2 - 69,4 - 69,4 B1n = Net domestic product (mp) 225,8 21,1 45,3 50,9 1,9 50,8 395,8 - 395,8 Total 609,1 51,5 89,8 115,1 4,9 50,8 921,2 - 921,2 Overview of the system I. Production account

  19. Not Total NFC FC GOV HH NPISH ROW Total sectorized economy S.11 S.12 S.13 S.14 S.15 S.1N S.1 S.2 S.1 + S.2 Resources: Net domestic product (mp) 225,8 21,1 45,3 50,9 1,9 50,8 395,8 - - Total 225,8 21,1 45,3 50,9 1,9 50,8 395,8 - - Uses: Compensation of employees 161,2 14,5 45,6 15,6 1,9 - 238,8 1,2 240,0 Taxes on production and imports 2,2 0,3 0,5 0,8 0,0 55,1 58,9 - 58,9 Less: subsidies -2,6 -0,1 -0,8 -0,4 0,0 -4,3 -8,2 - -8,2 B2n = Operating surplus or 65,0 6,4 0,0 34,9 0,0 - 106,3 - - mixed income Total 225,8 21,1 45,3 50,9 1,9 50,8 395,8 1,2 - Overview of the system II.1.1 Generation of income account

  20. Total NFC FC GOV HH NPISH ROW Total economy S.11 S.12 S.13 S.14 S.15 S.1 S.2 S.1 + S.2 Resources: Operating surplus / mixed income 65,0 6,4 0,0 34,9 0,0 106,3 - - Compensation of employees - - - 238,6 - 238,6 1,4 240,0 Taxes on production and imports - - 56,4 - - 56,4 2,5 58,9 Less: subsidies - - -6,9 - - -6,9 -1,3 -8,2 Property income 19,5 146,1 10,0 52,6 0,6 228,8 92,2 321,0 Total 84,5 152,5 59,5 326,1 0,6 623,2 94,8 - Uses: Property income 42,3 147,0 13,5 20,1 0,0 222,9 98,1 321,0 B5n = Net national income 42,2 5,5 46,0 306,0 0,6 400,3 - - Total 84,5 152,5 59,5 326,1 0,6 623,2 98,1 - Overview of the system II.1.2 Primary distribution of income

  21. Total NFC FC GOV HH NPISH ROW Total economy S.11 S.12 S.13 S.14 S.15 S.1 S.2 S.1 + S.2 Resources: Net national income 42,2 5,5 46,0 306,0 0,6 400,3 - - Current taxes on income, wealth - - 53,2 - - 53,2 0,2 53,4 Social contributions 4,8 43,7 66,3 0,5 0,1 115,4 0,3 115,7 Social benefits - - - 79,9 - 79,9 1,7 81,6 Other current transfers 3,2 18,4 69,8 19,1 5,3 115,8 9,7 125,5 Total 50,2 67,6 235,3 405,5 6,0 764,6 11,9 - Uses: Current taxes on income, wealth 12,6 3,0 - 36,7 - 52,3 1,1 53,4 Social contributions - - - 115,0 - 115,0 0,7 115,7 Social benefits 4,8 24,2 51,9 0,4 0,1 81,4 0,2 81,6 Other current transfers 3,8 18,4 76,3 21,7 2,0 122,2 3,3 125,5 B6n = Net disposable income 29,0 22,0 107,1 231,7 3,9 393,7 Total 50,2 67,6 235,3 405,5 6,0 764,6 5,3 - Overview of the system II.2 Secondary distribution of income

  22. Total NFC FC GOV HH NPISH ROW Total economy S.11 S.12 S.13 S.14 S.15 S.1 S.2 S.1 + S.2 Resources: Net disposable income 29,0 22,0 107,1 231,7 3,9 393,7 - - Adjustm. for change in net equity - - - 19,7 - 19,7 - 19,7 of households on pension funds Total 29,0 22,0 107,1 251,4 3,9 413,4 - - Uses: Final consumption expenditure - - 110,3 228,8 4,1 343,2 - - Adjustm. for change in net equity - 19,4 - - - 19,4 0,3 19,7 of households on pension funds B8n = Net saving 29,0 2,6 -3,2 22,6 -0,2 50,8 - - B12 = Current external balance - - - - - - -28,6 - Total 29,0 22,0 107,1 251,4 3,9 413,4 -28,3 - Overview of the system II.4 Use of income account

  23. Total NFC FC GOV HH NPISH ROW Total economy S.11 S.12 S.13 S.14 S.15 S.1 S.2 S.1 + S.2 In liabilities: Net saving 29,0 2,6 -3,2 22,6 -0,2 50,8 - - Current external balance - - - - - - -28,6 - Capital transfers, receivable 2,0 1,6 6,5 5,8 0,5 16,4 2,4 18,8 Capital transfers, payable -0,4 -1,3 -7,9 -7,8 0,0 -17,4 -1,4 -18,8 Total 30,6 2,9 -4,6 20,6 0,3 49,8 -27,6 - In assets: Gross fixed capital formation 44,3 1,5 16,4 30,5 0,2 92,9 - - Less: consumption of fixed capital 37,3 5,2 11,4 15,3 0,2 69,4 - - Changes in inventories -1,0 0,0 0,0 -0,3 0,0 -1,3 - - Acquisitions -/- disposals of non- 0,6 -0,2 -0,3 -0,1 0,0 0,0 - - produced non-financial assets B9n = Net lending(+)/borrowing(-) 24,0 6,8 -9,3 5,8 0,3 27,6 -27,6 - Total 30,6 2,9 -4,6 20,6 0,3 49,8 -27,6 - Overview of the system III.1 Capital account

  24. HH + Total NFC FC GOV ROW Total NPISH economy S.11 S.12 S.13 S.14/15 S.1 S.2 S.1 + S.2 In liabilities: Net lending(+)/borrowing(-) 24,0 6,8 -9,3 6,1 27,6 -27,6 0,0 Currency and deposits - 78,9 0,0 - 78,9 27,9 106,8 Securities other than shares -4,0 71,8 7,9 - 75,7 61,0 136,7 Loans 22,3 35,5 5,4 38,6 101,8 57,6 159,4 Shares and other equity 9,6 -14,8 - - -5,2 32,7 27,5 Insurance technical reserves - 29,8 - - 29,8 0,0 29,8 Other accounts payable 0,8 4,7 1,5 2,7 9,7 -0,2 9,5 Total 52,7 212,7 5,5 47,4 318,3 151,4 469,7 In assets: Monetary gold and SDRs - -0,5 - - -0,5 0,5 0,0 Currency and deposits 4,8 32,2 -0,6 19,2 55,6 51,2 106,8 Securities other than shares 4,1 46,0 -0,5 10,6 60,2 76,5 136,7 Loans 9,5 108,6 5,2 -0,5 122,8 36,6 159,4 Shares and other equity 23,2 18,3 -0,2 -10,3 31,0 -3,5 27,5 Insurance technical reserves 0,2 0,0 - 29,8 30,0 -0,2 29,8 Other accounts receivable 8,6 8,1 1,6 .. 18,3 -8,8 9,5 Statistical discrepancy 2,3 0,0 0,0 -1,4 0,9 -0,9 0,0 Total 52,7 212,7 5,5 47,4 318,3 151,4 469,7 Overview of the system III.2 Financial account

  25. HH + Total NFC FC GOV ROW Total NPISH economy S.11 S.12 S.13 S.14/15 S.1 S.2 S.1 + S.2 In liabilities: Currency and deposits - -24,9 -0,6 - -25,5 -16,1 -41,6 Securities other than shares 4,6 -20,2 5,6 - -10,0 -6,1 -16,1 Loans -11,9 -24,1 0,0 2,6 -33,4 -63,4 -96,8 Shares and other equity -118,8 -101,4 - - -220,2 -100,8 -321,0 Insurance technical reserves - -38,0 - - -38,0 -0,1 -38,1 Other accounts payable 2,0 0,0 -0,8 1,9 3,1 1,7 4,8 B.10 Changes in net worth due to 76,3 33,4 -4,7 -105,7 -0,7 0,7 0,0 changes in assets Total -47,8 -175,2 -0,5 -101,2 -324,7 -184,1 -508,8 In assets: Non-financial assets .. .. .. .. .. .. .. Monetary gold and SDRs - 0,3 - - 0,3 -0,3 0,0 Currency and deposits 0,0 -17,5 0,3 -0,2 -17,4 -24,2 -41,6 Securities other than shares -0,2 4,7 0,1 0,4 5,0 -21,1 -16,1 Loans -12,6 -50,3 0,2 0,0 -62,7 -34,1 -96,8 Shares and other equity -28,9 -119,2 -1,9 -62,0 -212,0 -109,0 -321,0 Insurance technical reserves -0,1 0,6 - -39,4 -38,9 0,8 -38,1 Other accounts receivable -6,0 6,2 0,8 .. 1,0 3,8 4,8 Total -47,8 -175,2 -0,5 -101,2 -324,7 -184,1 -508,8 Overview of the system III.3 Other changes in assets accounts

  26. HH + Total NFC FC GOV ROW Total NPISH economy S.11 S.12 S.13 S.14/15 S.1 S.2 S.1 + S.2 Liabilities: Currency and deposits - 799,1 1,3 - 800,4 274,7 1 075,1 Securities other than shares 55,8 577,4 188,0 - 821,2 315,8 1 137,0 Loans 397,9 444,7 62,7 401,6 1 306,9 728,3 2 035,2 Shares and other equity 599,5 890,9 - - 1 490,4 988,0 2 478,4 Insurance technical reserves - 670,5 - - 670,5 1,1 671,6 Other accounts payable 147,5 116,2 32,3 -22,4 273,6 37,9 311,5 B.90 Net worth -562,2 -141,8 -148,2 822,0 -30,2 30,2 0,0 Total 638,5 3 357,0 136,1 1 201,2 5 332,8 2 376,0 7 708,8 Assets: Non-financial assets .. .. .. .. .. .. .. Monetary gold and SDRs - 9,1 - - 9,1 -9,1 0,0 Currency and deposits 130,5 335,5 11,6 238,8 716,4 358,7 1 075,1 Securities other than shares 16,0 458,2 2,1 33,1 509,4 627,6 1 137,0 Loans 197,4 1394,6 45,2 2,8 1 640,0 395,2 2 035,2 Shares and other equity 151,8 1052,5 44,7 270,9 1 519,9 958,5 2 478,4 Insurance technical reserves 5,2 4,2 - 655,6 665,0 6,6 671,6 Other accounts receivable 137,6 102,9 32,5 .. 273,0 38,5 311,5 Total 638,5 3 357,0 136,1 1 201,2 5 332,8 2 376,0 7 708,8 Overview of the system IV.3 Opening balance sheet

  27. IV.1 Closing balance sheet HH + Total NFC FC GOV ROW Total NPISH economy S.11 S.12 S.13 S.14/15 S.1 S.2 S.1 + S.2 Liabilities: Currency and deposits - 853,1 0,7 - 853,8 286,5 1 140,3 Securities other than shares 56,4 629,0 201,5 - 886,9 370,7 1 257,6 Loans 408,3 456,1 68,1 442,8 1 375,3 722,5 2 097,8 Shares and other equity 490,3 774,7 - - 1 265,0 919,9 2 184,9 Insurance technical reserves - 662,3 - - 662,3 1,0 663,3 Other accounts payable 150,3 120,9 33,0 -17,8 286,4 39,4 325,8 B.90 Net worth -464,2 -101,6 -162,2 723,8 -4,2 4,2 0,0 Total 641,1 3 394,5 141,1 1 148,8 5 325,5 2 344,2 7 669,7 Assets: Non-financial assets .. .. .. .. .. .. .. Monetary gold and SDRs - 8,9 - - 8,9 -8,9 0,0 Currency and deposits 135,3 350,2 11,3 257,8 754,6 385,7 1 140,3 Securities other than shares 19,9 508,9 1,7 44,1 574,6 683,0 1 257,6 Loans 194,3 1 452,9 50,6 2,3 1 700,1 397,7 2 097,8 Shares and other equity 146,1 951,6 42,6 198,6 1 338,9 846,0 2 184,9 Insurance technical reserves 5,3 4,8 - 646,0 656,1 7,2 663,3 Other accounts receivable 140,2 117,2 34,9 .. 292,3 33,5 325,8 Total 641,1 3 394,5 141,1 1 148,8 5 325,5 2 344,2 7 669,7 Overview of the system

  28. Attention has changed from production to income and finance Interrelationship between “real” economy and financial economy Analysis of risks and vulnerabilities, among which price bubbles and interconnectedness More attention for households, including distributional aspects Etc. Considerable pressure to compile quarterly institutional sector accounts, including financial accounts and balance sheets Caveat: International comparison of data generally needs more careful analysis Some concluding remarks

  29. Thank you for your attention!

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