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ECB-RESTRICTED. FINAL. Fundamentals of the euro area balance of payments and international investment position. Joint ECB NBRM Seminar on Statistics Skopje, 3 October 2013. ECB-UNRESTRICTED. Overview. Basic concepts Method of compilation of euro area aggregates ECB Publication.

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fundamentals of the euro area balance of payments and international investment position

ECB-RESTRICTED

FINAL

Gabriel QuirósDG-Statistics

European Central Bank

Fundamentals of the euro area balance of payments and international investment position

Joint ECB NBRM Seminar on StatisticsSkopje, 3 October 2013

overview

ECB-UNRESTRICTED

Overview
  • Basic concepts
  • Method of compilation of euro area aggregates
  • ECB Publication
basic concepts

ECB-UNRESTRICTED

Basic concepts
  • Transactions and positions with rest of the world
    • Residency concept… euro area
  • Methodology based on IMF Balance of payments Manual (BPM5)… move to BPM6 in June 2014
  • Balance of payments
    • Transactions (not payments!)
      • Concept: cross border, change of ownership
      • Time of recording: when the ownership change
      • Value: transaction price
  • International investment position
    • Outstanding amounts at market prices
basic concepts1

ECB-UNRESTRICTED

Basic concepts
  • Balance of payments
    • Double entry system
      • Each transaction is reflected in two entries (credit and debit)
      • Imputed entries
    • Sign convention (new in BPM6)
      • Net increases of assets / liabilities (+)
      • Net decreases of assets / liabilities (-)
    • Mismatch owing to different sources: errors and omissions
basic concepts2

ECB-UNRESTRICTED

Basic concepts

Main accounts in the balance of payments

  • Current account
    • Goods
    • Services
    • Primary Income
    • Secondary Income
  • Capital account
  • Financial account
    • Direct investment
    • Portfolio investment
    • Financial derivatives
    • Other investment
    • Reserve assets
  • Errors and Omissions
basic concepts3

ECB-UNRESTRICTED

Basic concepts

Relationship between balance of payments and international investment position

  • Changes in i.i.p. =

B.o.p. financial transactions +

Changes related to exchange rates +

Changes related to asset prices +

Other changes (reclassifications, write-offs, etc.)

slide7

Basic concepts

Relationship between b.o.p. and i.i.p.

method of compilation of euro area aggregates

ECB-UNRESTRICTED

Method of compilation of euro area aggregates
  • Euro area as a single economic “entity”
  • Residency
    • Residents in euro area countries
    • ECB and ESM (not other EU institutions)
    • Importance (and complexity) of SPEs
  • Transactions and positions with rest of the world (“extra euro area”)
    • Criterion for geographical breakdown
method of compilation of euro area aggregates1

ECB-UNRESTRICTED

Method of compilation of euro area aggregates

Euro area BOP and IIP aggregation

  • In general
    • Euro area members compile national BOP and IIP with a geographical breakdown (intra and extra euro area)
    • Reserve assets by definition are all extra euro area (claims on non-residents of the euro area)
    • Add-up extra transactions and positions
    • Country contributions to the aggregate are not disclosed by the ECB
method of compilation of euro area aggregates2

ECB-UNRESTRICTED

Method of compilation of euro area aggregates
  • Exception: Liabilitiesof portfolio investment and related income
  • Difficulties to identify geographical breakdown of creditors (holders of securities)
  • Deduct intra euro area assets from national liabilities
  • Assumes matching of mirror data (no asymmetries!)
  • Collection security-by-security and classifications with the CSDB
method of compilation of euro area aggregates3

ECB-UNRESTRICTED

Method of compilation of euro area aggregates

Basis for an accurate euro area aggregation

Contributions should be:

  • Consistent on
    • methodologies and definitions
    • valuations
    • recording time
    • instrument and type of investment classification
  • Accurate geographical breakdown
  • Full coverage of SPEs
        • Otherwise, we accumulate errors…….
method of compilation of euro area aggregates4

ECB-UNRESTRICTED

Method of compilation of euro area aggregates
  • Euro area net errors & omissions (n.e.o)

= National net errors & omissions + euro area asymmetries

Chart: Cumulative n.e.o. in the b.o.p. of the euro area, US, UK and Japan

method of compilation of euro area aggregates5

ECB-UNRESTRICTED

Method of compilation of euro area aggregates
  • From 2007, WG-ES has worked intensively to improve the internal consistency of euro area b.o.p.
  • Adjustments at euro area level (macro corrections)
    • Correcting for geographical allocation of loans by non-MFIs
    • Grossing-up for euro area investment funds shares held by euro area households
    • Use of BIS data for deposits and loans vis-à-vis foreign banks
method of compilation of euro area aggregates6

ECB-UNRESTRICTED

Method of compilation of euro area aggregates
  • Changes to national data collection and compilation methods
    • Transit trade treatment (services vis-à-vis non-residents)
    • Debtor/creditor principle
    • S-B-S compilation
    • Coverage of SPEs
    • Improve coverage in financial derivatives
  • FDI network…
    • talk to the other members and share information
slide15

ECB Publication

  • Euro area balance of payments
    • Monthly (7 weeks after end of period)
      • Includes current account seasonally adjusted
      • Monetary presentation of the balance of payments
    • Quarterly geographical breakdown (4 months)
  • Euro area International investment position
    • Quarterly (4 months after end of period)
    • Annual geographical breakdown (11 months)
slide16

ECB publication

Quarterly b.o.p. and annual i.i.p.

From 2003

From 2003

  • From 2005
  • Brazil, Russia, India, China and Hong Kong
  • From 2006: BRIC countries + Hong Kong
slide17

ECB Publication

  • Monthly international reserves assets and foreign currency liquidity template
    • Only for the Eurosystem (Central Government not covered)
  • Euro area external debt
    • Quarterly (4 months after end of period)