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![Page 1: Globalisation and economic statistics: a „multifunctional” user’s perspective Gábor Oblath National Bank of Hungary Monetary Council 63rd SPC and 93rd.](https://reader030.fdocuments.us/reader030/viewer/2022020721/56649e195503460f94b060a5/html5/thumbnails/1.jpg)
Globalisation and economic statistics:
a „multifunctional” user’s perspective
Gábor OblathNational Bank of Hungary
Monetary Council
63rd SPC and 93rd DGINS Conference19–21 September 2007
Budapest, Hungary
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Why a „multifunctional” user’ view –personal background and motivations of the topics to be discussed
• Relationship with economic statistics/statisticians– Applied macroeconomic research and analysis:
• Former: short and longer-run macroeconomic analysis and projection• Technical cooperation with the Hungarian CSO
(Consistency of NA – in particular, data on external trade)
• Macroeconomic research (e.g. real convergence)
– Monetary policy: decisions crucially depend on the understanding and careful interpretation of macroeconomic statistics (e.g. change in GDP – output-gap; BOP-data – risk premium) – importance of expectations
– Education: applied macroeconomic analysis – in particular, handling and interpreting macro-data
• economists must understand the logic („architecture”) of macro-statistics;• search for developments behind headline indicators;• even if dissatisfied with official statistics, economists should never try to „invent”
statistics (counter-example: „dark matter”)
• Member (former chair) of the Economic Section of the Hungarian Statistical Society
– sympathize with statisticians:– recognise difficulties stemming from the conflicting trends of globalisation
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Outline• Conflicting trends within globalisation:
implications for economic statistics• Two macroeconomic-statistical issues related to
globalisationMeasuring, interpreting and comparing
• „real income” of nations (real convergence)
• the relative size of external imbalances– need for caution in reading the headline figures; but
– no need to invent alternative BOP-statistics – a critique of the notion of a „dark matter” in the current account of nations
• Conclusion: need for closer cooperation between statisticians and economists
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I. Globalisation and economic statistics: contrasting trends
• Globalisation: increasing openness – intensified interaction and interdependence among (economic units of) nations. Implications:
• On the one hand: the boundaries between the „home” vs. „external” economy (ROW) are fading– multinational companies, – migration, – trade in services (innovations), – off-shore companies etc., etc. – „residents”/”non-residents”?
• On the other hand: increasing importance of international– transactions („real” and financial flows)
– assets (equity and debt stocks)
on the home (national) economy
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Implications for statistics• Decreasing importance of national borders from
a microeconomic point of view the perspective of economic agents (household and
corporate sector) – suppliers of elementary datamoreover: incentives to obscure legal borders (e.g. tax
„optimisation”) • Increasing importance of cross-border
transactions from a macroeconomic perspectivegovernment policy international organisationseconomic analysts investors
Users of macro-statistics
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Problems for „producers” of statistics
Economic statisticians under double pressure:– increasing difficulties involved in collecting,
while
– increasing importance of providing
accurate/comparable data on cross-border transactions assets/liabilities
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Globalisation: problems with users of statistics
• In a globalised world-economy, analysts and market participants – interpret national developments in international comparison– categorise/group and assess countries according to very few and
very simple (headline) indicators („big picture”)
• Implication for statisticians: importance of – conceptual and statistical accuracy – common international standards: comparability of national data
• Implication for both statisticians and economists:– „education” of market participants– more information and increased focus on statistics/indicators
enabling finer analysis
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Globalisation and economic statistics – a personal experience
Globalisation of statistical sources – profound change due to the internet (a major symbol and driving force of globalisation)– Freely accessible huge international databases (e.g.:
Eurostat, AMECO, Groningen, EU KLEMS, PWT, [OECD])
– On-line access to several national statistics in user-friendly format
– However:• several inconsistencies between
– national and international databases;
– within international databases
– among international databases
• more coordination would be helpful
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II. Economic and statistical issues related to globalisation
1. „Real” economic/income convergence
2. The size of external imbalancesa) Problems with the CA/GDP indicator
b) An inadequate reaction to statistical problems due to globalisation: a critique of the notion of „dark matter”
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1. Comparison of macroeconomic „performance” in a global context
Levels of development („income levels”) and growth rates in international comparisons– Relative „income” level: economists’ shorthand for
GDP/capita at PPP; but:• Output: per capita vs. per person employed (per hour worked)
• GDP not a measure of „real” income – alternative measures
– Growth rates („catching up”): similar problems:
Interpretation of „income convergence”
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The meaning of „real income” in international comparison (output vs. income; level vs. change)
Output: GDP at PPP• Per person• Per employed person• Per hour worked
Income:• GDP?• RGDI (real GDP corrected for the change in the terms of
trade= implicit income transfers from/to RoW)• GNI = GDP+NFY• GNDI =GNI+NFTc• GNDI + net capital transfers • RGNI• RGNDI• RGNDI + net real capital transfers
Related to the current account (CA= GNDI-C-I)
- Basic macroeconomic concepts without a name - Related to the fundamental conceptof macroeconomic balance, i.e.:net lending (NL=CA+KA):
S
Change
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„Real income” growth in international comparison:
two aspects of income growth – more relevant in a globalised world
• A neglected aspect of „income convergence”: the role of the terms of trade*/
• Recent differences in real growth rates between– GDP – GNI,– GNDI – GNDI+cap.transfers**/ (does not exist in SNA/ESA)
• No attempt to combine the two; the major goal is illustration of some neglected aspects
*/based on AMECO**/based on Eurostat
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(A) RGDI/capita (change) real domestic income – the actual indicator of income-
growth (thus of income-convergence)
• Change in real GDP: represents change in the volume of output
• Change in RGDI: change in the real income of a country (output corrected for the impact of changes in the terms of trade – i.e., effect of „trading gain or loss”) [RGDI= (GDPt/Pgdp +T) /GDPt-1)]*/
• Is it really „real”? – are foreign trade price indices accurate?
– transfer pricing ?
• Perhaps: measurement problems of Px and Pm (especially price index of services), but if so:– opposite measurement problems in net exports (volumes)
– RGDI: essential indicator of (change in) macroeconomic income
– by definition, its „level” cannot be interpreted at current prices
• All in all: if ToT shows a trend, RGDI is relevant for income growth
*/T=(X-M)/Pxm – (X/Px – M/Pm)
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Cumulative differences in RGDI and GDP growth rates since 1995
-0,05
0,00
0,05
0,10
0,15
0,20
0,25
0,30
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Bulgaria Czech Republic
Estonia Latvia
Lithuania Hungary
Poland Romania
Slovenia Slovakia
LIT
RO
CZ
SK
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Cumulative difference between RGDI and GDP growth and annual growth rate of GDP:
1995-2006
-10%
-5%
0%
5%
10%
15%
20%
25%
Lith
uan
ia
Ro
ma
nia
Bul
garia
Cz
ech
Rep
ublic
De
nma
rk
Est
on
ia
Ne
the
rlan
ds
Spa
in
Un
ited
Kin
gdo
m
Gre
ece
Slo
veni
a
Mal
ta
EU
-27
Por
tuga
l
Cy
pru
s
Ital
y
Latv
ia
Fra
nc
e
Aus
tria
Pol
and
Ge
rman
y
Irel
and
Hu
ngar
y
Bel
giu
m
Slo
vaki
a
Sw
eden
Fin
lan
d
Cum diff GDI-GDP
GDP growth rate
percent
Percentage points
Source: Eurostat, AMECO
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The significance of changes in the terms of trade:number of years (at average GDP-growth) corresponding
to the cumulative difference between RGDI and GDP: 1995-2006
-3
-2
-1
0
1
2
3
4
5
Rom
ania
Bulgaria
Lithuania
Czech R
epublic
Denm
ark
Netherlands
United K
ingdom
Spain
Estonia
Greece
Slovenia
Malta
Latvia
Cyprus
Portugal
Italy
France
Poland
Ireland
Austria
Hungary
Slovakia
Germ
any
Belgium
Finland
Sw
eden
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Per capita GDP and RGDI relative levels in 2006 (EU15=100)
30
35
40
45
50
55
60
65
70
75
80
30 35 40 45 50 55 60 65 70 75 80
95_PPS
GDI_95PPS
BURO
PO
LALIT SK
HU
EE
CZSI
Per capita GDP at 2006 PPS
Per capitaGDP at1995 PPSand RGDI at1995 PPS
Two points: 1) differences between constant (1995) and current (06) PPS levels 2) differences between RGDI and GDP levels at prices of 1995
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GDP/cap (PPS) in 1995 (x) and in 2006; RGDI in 2006 at 1995 PPS (y)
(EU-15=100)
20
30
40
50
60
70
80
20 30 40 50 60 70 80
2006_PPS
GDI_95PPS
RO BU
LA
LIT
EE
PO
SK
HU
SI
CZ
GDP/cap (PPS) 1995
2006GDP/capRGDI/cap
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Comparison of GDP and RGDI convergence of CEE-10; 1995-2006
EU15=100
Average annual speed
of convergence
GDP/cap 95
GDP/cap 06
RGDI/cap06
RGDI_06/ GDP_06
ConvGDP
ConvGDI
Number of years of GDP/cap
convergence to fill the RGDI-
GDP gap Bulgaria 27,9 33,2 35,8 107,6 1,6% 2,3% 4,5 Czech Republic 63,1 71,0 75,6 106,4 1,1% 1,7% 5,7
Estonia 31,1 59,6 60,9 102,1 6,1% 6,3% 0,4 Latvia 27,0 51,8 51,7 99,9 6,1% 6,1% 0,0 Lithuania 30,0 51,5 57,6 111,8 5,0% 6,1% 2,3 Hungary 45,4 59,6 58,4 97,9 2,5% 2,3% -0,9 Poland 36,7 48,6 48,2 99,2 2,6% 2,5% -0,3 Romania 27,2 31,3 34,4 110,1 1,3% 2,2% 7,6 Slovenia 61,6 77,1 77,7 100,8 2,1% 2,1% 0,4 Slovakia 40,0 52,4 50,8 97,0 2,5% 2,2% -1,3
*/
*/ log(Y06/Y95)/t; where Y= Yi/Yeu15
**/
**/ log[(RGDI_06)/(GDP_06)]/(Conv_GDP)
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(B) The role of capital transfers
• GNDI + capital transfers: not an indicator of „income”, but:
• in less-developed EU-countries (receiving capital-transfers from EU-funds): a fundamental indicator of disposable resources;
• In these countries: GNDI [thus, gross savings (S) and the CA (=S-I) is a misleading indicator (asymmetry):– current contributions to the EU-budget decrease GNDI (S), but– no official macroeconomic aggregate indicating the impact of
capital transfers from the EU to the recipient country• Need to define/quantify „non-official” macroeconomic
aggregates (statistical indicators based on official statistics) for macro-analysis, e.g.
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GNDI + capital transfers (change at constant prices)
• Questions related to the „adequate” volume index of national income and disposable national resources
• Deflator of – Net factor income (GDP or DE deflator)– Net current transfers (GDP or DE deflator)– Net capital transfers (GDP or GCF deflator)
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GDP, GNI, GNDI and GNDI+captr.recent annual average volume changes: an illustration (CZ, HU, PL: 2004-2006)
CZ
5,8%
5,9%
6,0%
6,1%
6,2%
6,3%
6,4%
6,5%
6,6%
6,7%
GDP GNI GNDI GNDI+captr
HU
3,8%
3,8%
3,9%
3,9%
4,0%
4,0%
4,1%
4,1%
4,2%
GDP GNI GNDI GNDI+captr
PL
4,4%
4,6%
4,8%
5,0%
5,2%
5,4%
5,6%
GDP GNI GNDI GNDI+captr
• Different „levels” in growth rates (CZ: >6%; PL 5%; HU 4%),• different national patterns, but• a common feature in all 3 countries: GNDI+captr. growth > than „headline” indicators of economic growth (GDP/GNI)
Source: own calculations based on Eurostat
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Alternative indicators of „income convergence”: some lessons
• Globalisation increase in openness (higher X/GDP and M/GDP ratios) – even small changes in ToT (Px/Pm) entail– large/increasing changes in real income [RGDI (=GDP/Pgpd +T)];– this aspect of actual „income-convergence” (its cumulative impact) is
mostly neglected (example: CZ vs. SK)
• Globalisation increasing stocks of NFA/GDP; – increasing net income flows (recognised by official statistics):
GNI (GNP)
• Within EU increasing role of unrequited transfers (for NMS)– Current transfers (minor part): (recognised by official statistics):
GNDI– Capital transfers (larger part): economists should reconstruct
(GNDI+captr)
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II. Economic and statistical issues related to globalisation
1. „Real” economic/income convergence
2. The size of external imbalancesa) Problems with the CA/GDP indicator
b) An inadequate reaction to statistical problems due to globalisation: a critique of the notion of „dark matter”
![Page 25: Globalisation and economic statistics: a „multifunctional” user’s perspective Gábor Oblath National Bank of Hungary Monetary Council 63rd SPC and 93rd.](https://reader030.fdocuments.us/reader030/viewer/2022020721/56649e195503460f94b060a5/html5/thumbnails/25.jpg)
II/a. Interpreting and comparing external imbalances
Realated to the problem of measuring and interpreting levels of income/development, i.e:– disposable income vs. disposable resources
(GNDI or GNDI+capital transfers?)– The general problem of international
comparisons: implications of differences in the level and structure of national prices
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Interpreting external imbalances (cont’)
• Globalisation involves increasing cross-country gross and net capital flows
• Net capital flows involve external imbalances
• Lazy (too busy) economic analysts observe (internationally compare) a single indicator of external (im-)balance: the current account/GDP ratio (CA/GDP)
• This is supported by rules of thumb:– if CA/GDP above -(3-5)%: dangerous
• However, this „wisdom” is misleading; there are problems with both the– numerator (CA) and the – denominator (GDP)
• We focus at the economic-statistical problems of this popular indicator• There are some more fundamental economic problems with the CA/GDP ratio as well – these
are not covered here, but a hint:– How deficits are financed (debt or FDI)– Domestic counterpart:
• private vs. public• consumption or investment
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Interpreting external imbalances: problems with the numerator of CA/GDP
1. Relevance of the „capital account” of the BOP (involving capital transfers)
2. Interpretation of reinvested earnings
3. Interpreting changes in NFA (capital gains/losses on NFA)
4. NEO
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Problems with the numerator: the relevance of CA+KA (1)
• Several analysts missed the change in the concepts of the BOP:
Present structure• Current account (CA)• Capital account (KA) [ former capital account]• Financial account (= former capital account)• NEO• dR
• A practical problem: for less developed countries of the EU:– transfers from the EU: (mostly) in the KA– transfers to the EU: in the CA
Net financingrequirement
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Problems with the numerator (1):CA and KA+CA in % of GDP
(average of 2000-2005)
-10%
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
CZ EST HU PL SK GR ESP PT IRL USA
CA/GDP
(CA+KA)/GDP
Source: Eurostat
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CA vs. CA+KA (in % of GDP): CZ, HU, PL
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2005 2006
CA+KA
CA-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
2005 2006
CA+KA
CA
-4,0%
-3,5%
-3,0%
-2,5%
-2,0%
-1,5%
-1,0%
-0,5%
0,0%
2005 2006
CA+KA
CA
CZ HU
PL
The role of capital transfers isincreasing; most visibly forPoland
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Problems of the numerator (2):reinvested earnings – a special expenditure
• FDI income consists of two parts:– repatriated vs. – reinvested earnings
• Reinvested: recorded as „outflow” in the CA, but– no actual transaction takes place;– remains in the country (a potential source of
investment);– „finances” itself: same item in the current and financial
account (does not affect the foreign exchange market)
• Should be treated differently
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Problems of the numerator (2): reinvested earnings in % of GDP (average of 2000-2005)
-12%
-10%
-8%
-6%
-4%
-2%
0%
CZ EST HU PL ESP PT USA
CA/GDP
(CA+KA)/GDP
(CA+KA+IRE)/GDP
(CA+KA+NRE)/GDP
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Problems with the denomiator of the CA/GDP ratio
• According to the received wisdom: the denominator of the CA/GDP-ratio „standardizes” the size of external balances – it corrects for differences in the size of national economies
• This notion is mistaken: – CA measured at international prices,– GDP measured at domestic prices
• The relative price level of GDP (PPP/exchange rate) is an increasing function of the level of real development (GDP/cap at PPP): Balassa-Samuelson effect (traded vs. non traded prices)
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GDP/capita and relative GDP price levels (average 2000-2005)
40
50
60
70
80
90
100
40 50 60 70 80 90 100
GD
P r
elat
ive
pri
ce
LV
LT
EE
PL
SK
HUCZ
MT
PT
SL
GR
CY
ES
Per capita GDP (PPS)
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Problems with the denomiator of the CA/GDP ratio (cont.)
• In less developed countries – because of the low level of non-traded (service) prices, the CA/GDP overstates the relative size of external imbalances– E.g.: extremely low relative price of
collective/government services in NMS of EU has no implication whatsoever for the relative size of external imbalances
• How to handle the problem? – CA/GDP(PPP) – CA/foreign receipts
• CA/Xgs• CA/CA_total receipts
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Relative GDP price levels and the relative price level of goods, total services and government services
(average of 2000-2005)
20
30
40
50
60
70
80
90
100
40 50 60 70 80 90
Goods
Services
Gov. services
SK
LT LV
CZ PL
HU EE
MT SL PTGR ES
CY
GDP relative price level
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CA+KA in % of GDP, exports of goods and services and total
current revenues (average of 2000-2005)
-30%
-25%
-20%
-15%
-10%
-5%
0%
CZ EST HU PL SK GR ESP PT
(CA+KA)/GDP
(CA+KA)/Xgs
(CA+KA)/CFR
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CA+KA in % of GDP at current prices and GDP at PPP
(average of 2000-2005)
-9%
-8%
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
CZ EST HU PL SK GR ESP PT IRL USA
(CA+KA)/GDP
(CA+KA)/GDP_PPP
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Summing up problems of international comparison of external imbalances
• External imbalances are natural in a globalised world economy
• However: sudden shifts in „risk appetite” perception of the size of external imbalances
• The standard indicator (CA/GDP) - suffers from (at least) two weaknesses – CA: economically unsound indicator of external imbalance;
relevance of• KA• Reinvested earnings
– GDP (at current prices) does not correct for differences in the size of economies
• However, if CA/GDP applied by many analysts, it effects perceptions of the public it may become a driving force of expectations
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II. Economic and statistical issues related to globalisation
1. „Real” economic/income convergence
2. The size of external imbalancesa) Problems with the CA/GDP indicator
b) An inadequate reaction to statistical problems due to globalisation: a critique of the notion of „dark matter”
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The notion of „dark-matter” (DM) in the BOP of nations: claims
• H-S*/ claim: BOP statistics are false: US has no CA deficit
• Why? Because US NII continuously positive NFA and ΔNFA (CA) also „has to be” positive
• „Implied” CA balance reconstructed in two steps– Capitalising NII by an arbitrary 5% (P/E: 20)– Annual change in capitalised NII „implied” CA
• Difference between actual and implied CA: exports of „dark matter” (intangible capital)
*/R. Hausmann - F. Sturzenegger: Global imbalances or bad accounting? The missing dark matter in the wealth of nations (May, 2006): http://200.32.4.58/~fsturzen/dark_matter_may06.pdf
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US net international investment income
(NII = net profits and interest) (million USD)
0
10 000
20 000
30 000
40 000
50 000
60 000
70 000
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
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US: CA and two components: net exports (NX) and net investment income (NII)
(% of GDP)
-7%
-6%
-5%
-4%
-3%
-2%
-1%
0%
1%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
NII/GDP
CA/GDP
NX/GDP
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US: net investment income (NII), the CA, and NFA
(at current cost and market value) in % of GDP
-24%
-22%
-20%
-18%
-16%
-14%
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
NII/GDP
CA/GDP
NFA_market/GDP
NFA_curcost/GDP
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The world according Hausmann-SurzeneggerImplication: no global imbalances
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Rate of return on market value of US foreign assets (FA) and liabilities (FL)
2%
3%
4%
5%
6%
7%
8%
9%
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
iFL_market
iFA_market
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The notion of „dark-matter”: some critical remarks in defence of statistics
• If BOP statistics inaccurate: why just NII right, if both CA and NFA wrong
• Several plausible/relevant explanations for differences in rates of return on FA and FL: no need to „invent” new BOP statistics
• Dangerous precedent: – if your story/theory does not fit the facts– or statistics (apparently or actually) contradict one another– you can simply construct data corresponding to your preferred
interpretation • Having said this,
– exports and imports of intangible capital (not covered by statistics) is quite possible under conditions of globalisation,
– identifying and measuring it – constitutes a major challenge for both economists and statisticians
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Globalisation and economic statistics: some conclusions
• Need for cooperation between economists and statisticians• Education of the public and professional users of statistics:
common task• Economists should be
– more tolerant and be aware of the difficulties of supplying accurate statistics in the era of globalisation;
– should express their dissatisfaction with statistics in constructive forms• Statisticians could be more open
– to criticisms regarding inconsistencies,– to suggestions regarding
• the importance of potential un- (or -mis-) recorded aspects of economic activity (e.g. intangible capital)
• publishing non-traditional indicators of economic development and external balances
– in revealing their specific problems related to the accuracy of statistics