National accounts
Encyclopedia
National accounts or national account systems (NAS) are the implementation of complete and consistent accounting technique
s for measuring the economic activity of a nation. 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, for example production and the income from it. As a method
, the subject may be termed national accounting or, more generally, social accounting. Stated otherwise, national accounts as systems may be distinguished from the data
associated with those systems. While sharing many common principles with business accounting, national accounts are based on economic concepts.
(measured over a period) and stocks
(measured at the end of a period), ensuring that the flows are reconciled with the stocks. As to flows, the national income and product accounts
(in U.S. terminology) provide estimates for the money value of income and output per year or quarter, including GDP
. As to stocks, the 'capital accounts' are a balance-sheet
approach that has assets on one side (including values of land, the capital
stock, and financial assets) and liabilities and net worth on the other, measured as of the end of the accounting period. National accounts also include measures of the changes in assets, liabilities, and net worth per accounting period. These may refer to flow of funds
accounts or, again, capital account
s.
There are a number of aggregate measures in the national accounts, notably including gross domestic product or GDP
, perhaps the most widely cited measure of aggregate economic activity. Ways of breaking down GDP include as types of income (wages, profits, etc.) or expenditure (consumption, investment/saving, etc.). Measures of these are examples of macro-economic data
. Such aggregate measures and their change 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.
National accounts can be presented in nominal or real amounts, with real amounts adjusted to remove the effects of price changes over time. A corresponding price index
can also be derived from national output. Rates of change of the price level and output and the may also be of interest. An inflation rate
(growth rate of the price level) may be calculated for national output or its expenditure components. Economic growth
rates (most commonly the growth rate of GDP) are generally measured in real (constant-price) terms. One use of economic-growth data from the national accounts is in growth accounting
across longer periods of time for a country or across to estimate different sources of growth, whether from growth of factor inputs
or technological change
.
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 harmonized 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. Practical issues include inaccuracies from differences between economic and accounting methodologies, lack of controlled experiments on quality of data from diverse sources, and measurement of intangibles
and services of the banking and financial sectors.
Two developments relevant to the national accounts since the 1980s include the following. Generational accounting
is a method for measuring redistribution of lifetime tax burdens across generations from social insurance
, including social security
and social health insurance. It has been proposed as a better guide to the sustainability of a fiscal policy
than budget deficits, which reflect only taxes minus spending in the current year. Environmental or green national accounting is the method of valuing environmental assets, which are usually not counted in measuring national wealth, in part due to the difficulty of valuing them. The method has been proposed as an alternative to an implied zero valuation of environmental assets and as a way of measuring the sustainability of welfare levels in the presence environmental degradation.
Macroeconomic data not derived from the national accounts are also of wide interest, for example some cost-of-living index
es, the unemployment rate, and the labor force participation rate. In some cases, a national-accounts counterpart of these may be estimated, such as a price index
computed from the personal consumption expenditure
s and the GDP gap
(the difference between observed GDP and potential GDP).
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).
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
of the U.K. led later contributions during World War II and thereafter. The first formal national accounts were published by the United States in 1947. Many European countries followed shortly thereafter, and the United Nations published A System of National Accounts and Supporting Tables in 1952. International standards for national accounting are defined by the United Nations System of National Accounts
, with the most recent version released for 2008.
In Europe the worldwide System of National Accounts has been adapted in the European System of Accounts
(ESA), which is applied by members of the European Union and many other European countries. Research on the subject continues from its beginnings through today.
Scientific technique
A scientific technique is any systematic way of obtaining information about a scientific nature or to obtain a desired material or product.Scientific techniques can be divided in many different groups, e.g.:# Preparative techniques...
s for measuring the economic activity of a nation. 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, for example production and the income from it. As a method
Methodology
Methodology is generally a guideline for solving a problem, with specificcomponents such as phases, tasks, methods, techniques and tools . It can be defined also as follows:...
, the subject may be termed national accounting or, more generally, social accounting. Stated otherwise, national accounts as systems may be distinguished from the data
Economic data
Economic data or economic statistics may refer to data describing an actual economy, past or present. These are typically found in time-series form, that is, covering more than one time period or in cross-sectional data in one time period Economic data or economic statistics may refer to data...
associated with those systems. While sharing many common principles with business accounting, national accounts are based on economic concepts.
Scope
National accounts broadly present output, expenditure, and income activities of the economic actors (corporations, government, households) in an economy, including their relations with other countries' economies, and their wealth (net worth). They present both flowsStock and flow
Economics, business, accounting, and related fields often distinguish between quantities that are stocks and those that are flows. These differ in their units of measurement. A stock variable is measured at one specific time, and represents a quantity existing at that point in time , which may have...
(measured over a period) and stocks
Stock and flow
Economics, business, accounting, and related fields often distinguish between quantities that are stocks and those that are flows. These differ in their units of measurement. A stock variable is measured at one specific time, and represents a quantity existing at that point in time , which may have...
(measured at the end of a period), ensuring that the flows are reconciled with the stocks. As to flows, the national income and product accounts
National Income and Product Accounts
The National Income and Product Accounts are part of the national accounts of the United States. They are produced by the Bureau of Economic Analysis of the Department of Commerce...
(in U.S. terminology) provide estimates for the money value of income and output per year or quarter, including GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
. As to stocks, the 'capital accounts' are a balance-sheet
Balance sheet
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A...
approach that has assets on one side (including values of land, the capital
Capital (economics)
In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...
stock, and financial assets) and liabilities and net worth on the other, measured as of the end of the accounting period. National accounts also include measures of the changes in assets, liabilities, and net worth per accounting period. These may refer to flow of funds
Flow of Funds
Flow of funds accounts are a system of interrelated balance sheets for a nation, calculated periodically. There are two types of balance sheets, those showing* The aggregate assets and liabilities for financial and nonfinancial sectors, and...
accounts or, again, capital account
Capital account
The current and capital accounts make up a country's balance of payment . Together these three accounts tell a story about the state of an economy, its economic outlook and its strategies for achieving its desired goals...
s.
There are a number of aggregate measures in the national accounts, notably including gross domestic product or GDP
Gross domestic product
Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....
, perhaps the most widely cited measure of aggregate economic activity. Ways of breaking down GDP include as types of income (wages, profits, etc.) or expenditure (consumption, investment/saving, etc.). Measures of these are examples of macro-economic data
Economic data
Economic data or economic statistics may refer to data describing an actual economy, past or present. These are typically found in time-series form, that is, covering more than one time period or in cross-sectional data in one time period Economic data or economic statistics may refer to data...
. Such aggregate measures and their change 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
Input-output model
In economics, an input-output model is a quantitative economic technique that represents the interdependencies between different branches of national economy or between branches of different, even competing economies. Wassily Leontief developed this type of analysis and took the Nobel Memorial...
which show how industries interact with each other in the production process.
National accounts can be presented in nominal or real amounts, with real amounts adjusted to remove the effects of price changes over time. A corresponding price index
Price index
A price index is a normalized average of prices for a given class of goods or services in a given region, during a given interval of time...
can also be derived from national output. Rates of change of the price level and output and the may also be of interest. An inflation rate
Inflation rate
In economics, the inflation rate is a measure of inflation, the rate of increase of a price index . It is the percentage rate of change in price level over time. The rate of decrease in the purchasing power of money is approximately equal.The inflation rate is used to calculate the real interest...
(growth rate of the price level) may be calculated for national output or its expenditure components. Economic growth
Economic growth
In economics, economic growth is defined as the increasing capacity of the economy to satisfy the wants of goods and services of the members of society. Economic growth is enabled by increases in productivity, which lowers the inputs for a given amount of output. Lowered costs increase demand...
rates (most commonly the growth rate of GDP) are generally measured in real (constant-price) terms. One use of economic-growth data from the national accounts is in growth accounting
Growth accounting
Growth accounting is a procedure used in economics to measure the contribution of different factors to economic growth and to indirectly compute the rate of technological progress, measured as a residual, in an economy...
across longer periods of time for a country or across to estimate different sources of growth, whether from growth of factor inputs
Factors of production
In economics, factors of production means inputs and finished goods means output. Input determines the quantity of output i.e. output depends upon input. Input is the starting point and output is the end point of production process and such input-output relationship is called a production function...
or technological change
Technological change
Technological change is a term that is used to describe the overall process of invention, innovation and diffusion of technology or processes. The term is synonymous with technological development, technological achievement, and technological progress...
.
The accounts are derived from a wide variety of statistical
Statistics
Statistics is the study of the collection, organization, analysis, and interpretation of data. It deals with all aspects of this, including the planning of data collection in terms of the design of surveys and experiments....
source data including surveys
Statistical survey
Survey methodology is the field that studies surveys, that is, the sample of individuals from a population with a view towards making statistical inferences about the population using the sample. Polls about public opinion, such as political beliefs, are reported in the news media in democracies....
, administrative and census data, and regulatory data, which are integrated and harmonized 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. Practical issues include inaccuracies from differences between economic and accounting methodologies, lack of controlled experiments on quality of data from diverse sources, and measurement of intangibles
Intangible asset
Intangible assets are defined as identifiable non-monetary assets that cannot be seen, touched or physically measured, which are created through time and/or effort and that are identifiable as a separate asset...
and services of the banking and financial sectors.
Two developments relevant to the national accounts since the 1980s include the following. Generational accounting
Generational accounting
Generational accounting is a relatively new method of national accounting for measuring redistribution of lifetime tax burdens across generations from social insurance, including social security and social health insurance...
is a method for measuring redistribution of lifetime tax burdens across generations from social insurance
Social insurance
Social insurance is any government-sponsored program with the following four characteristics:* the benefits, eligibility requirements and other aspects of the program are defined by statute;...
, including social security
Social security
Social security is primarily a social insurance program providing social protection or protection against socially recognized conditions, including poverty, old age, disability, unemployment and others. Social security may refer to:...
and social health insurance. It has been proposed as a better guide to the sustainability of a fiscal policy
Fiscal policy
In economics and political science, fiscal policy is the use of government expenditure and revenue collection to influence the economy....
than budget deficits, which reflect only taxes minus spending in the current year. Environmental or green national accounting is the method of valuing environmental assets, which are usually not counted in measuring national wealth, in part due to the difficulty of valuing them. The method has been proposed as an alternative to an implied zero valuation of environmental assets and as a way of measuring the sustainability of welfare levels in the presence environmental degradation.
Macroeconomic data not derived from the national accounts are also of wide interest, for example some cost-of-living index
Cost-of-living index
Cost of living is the cost of maintaining a certain standard of living. Changes in the cost of living over time are often operationalized in a cost of living index. Cost of living calculations are also used to compare the cost of maintaining a certain standard of living in different geographic areas...
es, the unemployment rate, and the labor force participation rate. In some cases, a national-accounts counterpart of these may be estimated, such as a price index
Personal consumption expenditures price index
The PCE price index is a United States-wide indicator of the average increase in prices for all domestic personal...
computed from the personal consumption expenditure
Personal Consumption Expenditure
The Personal Consumption Expenditure is the component statistic for consumption in GDP collected by the BEA. It consists of the actual and imputed expenditures of households and includes data pertaining to durable and non-durable goods, and services. It is essentially a measure of goods and...
s and the GDP gap
GDP gap
The GDP gap or the output gap is the difference between potential GDP and actual GDP or actual output. The calculation for the output gap is Y*–Y where Y* is actual output and Y is potential output...
(the difference between observed GDP and potential GDP).
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).
History
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 DepressionGreat Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
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
Colin Clark
Colin Grant Clark was a British and Australian economist and statistician who worked in both the United Kingdom and Australia. He pioneered the use of the gross national product as the basis for studying national economies.-Biography:Colin Clark was born in London in 1905 and was educated at the...
and Simon Kuznets
Simon Kuznets
Simon Smith Kuznets was a Russian American economist at the Wharton School of the University of Pennsylvania who won the 1971 Nobel Memorial Prize in Economic Sciences "for his empirically founded interpretation of economic growth which has led to new and deepened insight into the economic and...
. Richard Stone
Richard Stone
Sir John Richard Nicholas Stone was an eminent British economist who in 1984 received the Nobel Memorial Prize in Economic Sciences for developing an accounting model that could be used to track economic activities on a national and, later, an international scale...
of the U.K. led later contributions during World War II and thereafter. The first formal national accounts were published by the United States in 1947. Many European countries followed shortly thereafter, and the United Nations published A System of National Accounts and Supporting Tables in 1952. International standards for national accounting are defined by the United Nations System of National Accounts
United Nations System of National Accounts
The United Nations System of National Accounts is an international standard system of national accounts, the first international standard being published in 1953...
, with the most recent version released for 2008.
In Europe the worldwide System of National Accounts has been adapted in the European System of Accounts
European System of Accounts
The European System of Accounts is the system of national accounts and regional accounts used by members of the European Union. It was most recently updated in 1995 ....
(ESA), which is applied by members of the European Union and many other European countries. Research on the subject continues from its beginnings through today.
See also
- Measures of national income and outputMeasures of national income and outputA variety of measures of national income and output are used in economics to estimate total economic activity in a country or region, including gross domestic product , gross national product , and net national income . All are specially concerned with counting the total amount of goods and...
- System of Material Product Balance
- Official statisticsOfficial statisticsOfficial statistics are statistics published by government agencies or other public bodies such as international organizations. They provide quantitative or qualitative information on all major areas of citizens' lives, such as economic and social development, living conditions, health, education,...
- United Nations System of National AccountsUnited Nations System of National AccountsThe United Nations System of National Accounts is an international standard system of national accounts, the first international standard being published in 1953...
- Penn World TablePenn World TableThe Penn World Table is a set of national-accounts data developed and maintained by scholars at the University of Pennsylvania to measure real GDP from the corresponding relative price levels across countries and over time...
- European System of AccountsEuropean System of AccountsThe European System of Accounts is the system of national accounts and regional accounts used by members of the European Union. It was most recently updated in 1995 ....
- Aggregation problemAggregation problemAn aggregate in economics is a summary measure describing a market or economy. The aggregation problem refers to the difficulty of treating an empirical or theoretical aggregate as if it reacted like a less-aggregated measure, say, about behavior of an individual agent as described in general...