SUT- EQUALIZER

The new technology software

to compile Supply -Use Tables in

National Accounts

SUT- EQUALIZER

Revision: Spring 2020

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Table of contents

BACKGROUND .................................................................................................................... 1

WHAT DO WE SOLVE? ......................................................................................................... 2

WHY IS THERE A NEED FOR A METHODOLOGY AND A TOOL? .................................................... 3

HOW DO WE COVER YOUR NEEDS? ....................................................................................... 5

How does this architecture generate efficiency of usage? .................................................................................. 6

How does the SUTIOT-Equalizer supersede Ms-Excel? .................................................................................... 6

How does the SUTIOT-Equalizer reinforce the teamwork? ................................................................................ 7

How are SUT-Equalizer and Ms-Excel complementing each other? .................................................................. 8

HOW DO WE PROVIDE THE SYSTEM? ..................................................................................... 9

WHAT DO YOU GET? ......................................................................................................... 10

LAST DEVELOPMENTS TOWARDS VERSION 2.0? ................................................................... 11

DESIGNERS’ CORNER: ...................................................................................................... 12

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Hendyplan SUT-Equalizer

BACKGROUND Supply-Use Tables (SUTs) are a strong device for comparing and contrasting data from various sources. They can be applied to improve the coherence of the economic information system, by products, industries and institutional sectors, in value and in volume, at a meso-economic. They provide the most convenient way to synthesise GDP through the three approaches (output, expenditures and income).

Input-Output Tables (IOTs), derived from SUTs, are an even more powerful tool that describe coherent and comprehensive picture of the nation’s economy. They are useful for economic analysis such as developing macroeconomic models and impact analysis thanks to the famous Leontief formula: X = (I-A)-1Y.

The 2008 System of National Accounts (SNA2008), as its predecessor, the 1993 System of National Accounts (SNA93), both describe the SUTs and IOTs as integral components of the international national accounting framework. They provide a solid basis for (i) measuring economic output and growth, (ii) providing relevant information to policy makers, and (iii) monitoring progress toward the United Nations Sustainable Development Goals (SDGs), relating especially to poverty alleviation.

Furthermore, they are the building blocks for other economic accounts, as they incorporate a complete and balanced set of economic statistics, and they present a full accounting of industry and final-use transactions. They also facilitate quarterly national accounts and short-term projections.

The derivation of IOTs from SUTs is achieved through some

transformations, such as reduction to basic prices and

replacement of industries by products (or the opposite, according

to the treatment of secondary products for a given industry). A

series of assumptions are needed for allocation of each kind of

resource (production, imports, trade and transport margins and

taxes less subsidies on products) in each kind of use (intermediate

consumption by industries and institutional sectors, final

consumption expenditures by institutional sectors, GFCF, change

in inventories and exports).

Economic analysts often need to focus on

the industry/sector or meso-level of

economic activity. Key sector analysis,

sectoral impact studies, partial and general

equilibrium trade and industry analysis are

frequently conducted in both the public and

the private sector.

Input-Output tables (IOTs) or Supply-Use

Tables (SUTs) analyses are often used as

tools for such meso-level economic

enquiry. Researchers use these tools to

analyse the impact of policy-related and

other changes on the economy.

They can also be extended to address

broader concerns, such as the impact of

policy on the environment or on energy

requirements. Economic modelling

techniques that capture economy-wide

impacts of policy changes are increasingly

being used in academic, consulting,

research and policy environments.

BUT HOW CAN A METHODOLOGY BE SO ACCURATE BEFORE THE GDP IS KNOWN, AND HOW DOES IT STRUCTURE MY NATIONAL ACCOUNTS DEPARTMENT?

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WHAT DO WE SOLVE? A “Supply-Use Table” is compiled in value and volume during the phase of GDP synthesis. Its main objective is to

make aggregates more reliable (value, volume and price together as a mean), as they are made consistent.

Generally, it is produced in commodity x industry.

A symmetric “Input-Output Table” in value and volume is produced in commodity x commodity (= homogeneous

branch) at basic prices, with distinction between contents in domestic production and contents in imports, which is

very useful for analyses. Generally, it is compiled after the phase of GDP synthesis.

We compile a “Supply-Use Table” in such a detailed way that the deduction of Input-Output Tables is almost

automatic. The three approaches of GDP are consequently more consistent, and time is earned for dissemination

to the users. The figure below expresses the standard structure of the Supply-Use table. The system is fairly

complex to solve, and the best solution cannot be reached through a completed automated optimization process.

FIGURE 1: REPRESENTATION OF THE SUPPLY-USE TABLE

Economic analysis takes place where it is helpful and guides the convergence to a reasonable dataset. Looking horizontally at the map of the SUT like in figure 1, the constraints are created through a relationship as expressed below.

This basic pattern for a single product is expressed in a "Commodity Flow", both defined in value and in volume

(preferably at previous year prices). Thus, compiling the SUT at year t means:

▪ Taking the values at year t-1 as initial values to the calculation processes;

▪ Deriving the values at year t and solving the SUT in value homogeneously according to the expenditures approach, simultaneously with value according to the expenditures approach;

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▪ Deriving the volumes at year t and solving the SUT in volume;

▪ Reconciling iteratively the expenditures approach with the sector accounts and the output approach (mainly through the IC matrix).

The figure below illustrates the process.

FIGURE 2: SOLVING PROCESS IN THE CORE OF THE SUT-EQUALIZER

The stepwise procedure secures the convergence to the best equilibrium:

▪ Exogenous variables are prepared, loaded in the database;

▪ The team of statisticians works on the equilibrium of single commodity flows;

▪ Once all local equilibria are met, the Recapitulation step starts, consolidating all individual results in a single spreadsheet;

▪ The MAKE Matrix in Volume and IC (resp. GFCF) Matrix in value and in volume are fed from all individual commodity flows and the coordinator is able to visualize the global discrepancies;

▪ The distribution of the disequilibrium helps the coordinator in guiding the convergence to a better new round, through a new set of exogenous variables, thus an economic scenario;

▪ The new set of exogenous variables is loaded in the database and a new iteration takes place.

WHY IS THERE A NEED FOR A METHODOLOGY AND A

TOOL? The SUT is a synthetic tool recommended by “System of National Accounts 2008” manual (chapter 14) compiled

before “official” National Accounts figures are produced. They focus on volume, price and value developments at a

highly disaggregated level of the products’ classification (as disaggregated as possible), and explain where

products come from and how they are used. SNA 2008 explains how many cases are to be taken into account,

EXOGENOUS:

MAKE IN VALUE

IPI,

Imports,ExportsVAT Rates, PPIs, CPIs, Priv. Cons., Ext. Trade, Tax & Subsidies, ...

CommodityFlows

Recapitulation

GFCF and IC

Exogenous

VAT received by

General Governt

MAKE Matrix in Volume

A round in SUT-Equalizer

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depending on the variety of uses and resources and on the weakest component (in a statistical sense). There is already a huge need for a methodology and a flexible tool.

According to the "System of National Accounts 2008" manual (chapter 28), it is highly recommended to produce input-output tables, even though they are an analytical tool that requires more detailed information after the SUT. They raise other methodological challenges. Most often, the resolution of the IOT needs to modify the official National Accounts figures, but it is too late, and more or less convenient solutions are found to hide these inconsistencies. The simultaneous resolution of the SUT and of the IOT is the best methodological solution for the quality of National Accounts, but requires a well and stable performing tool.

This is the purpose of SUT-Equalizer, which Hendyplan hereby presents.

Let us have a look at the size of the problem!

A typical useful software to solve the problem is Ms-Excel. The main object to consider here is a table, but there are hundreds of them, impressive amounts of relationships between the cells and unavoidably external links between sheets, a major need to keep the track of the changes from one set of assumptions to the other. As the users are learning from one year to the other, it is also important to keep the memory of the experience over the years as a starting point of a year’s compilation is probably the values published at the end of the last exercise.

Let’s take the case of the European Statistical System where Eurostat has defined precisely how the tables have to be structured.

A country reporting SUTs and IOTs at the European level is for example analysing its economy following the standardized Classification of Product Activity (CPA1). It contains 300 groups at the 3-digit disaggregation level. The analysis involves 300 sheets called Commodity Flows (CF), expressing the balances product by product where

▪ The rows are the decomposition of the supplies and of the uses formed by the composition of ‘Operation x Institutions’; this represents some 80 lines in the European Statistical System case,

▪ The columns are the representation of the mechanism insuring the consistency of the values in the previous year, the current volumes and the current values through the indices; this means some 6 columns where exogenous variables should be added like the VAT rates and the reference indices as benchmark for the understanding of the magnitude of the changes an extra set of 6 to 7 columns.

The balancing system product by product is not the same, but depends on the product: the set of exogenous variables feeding the system will differ, like for example, a product belonging to the industrial sector, or to the services sector (Index of Production in Industry, many price indicators), vs. to the services sector. Thus, there are models representing a specific set of relationships between the exogenous variables and the National Accounts figures to estimate, according to their availability and reliability. By experience, there could be in a 300-product breakdown some 15-20 relevant models2 covering the whole economy, completed by an interactive balancing system (manual adjustment).

At the only stage of the SUT, the system is a complex set of more than a hundred of thousands of cells, where it needs to understand where are the specificities of relationships and where are the empty (meaning not relevant) relationships.

1 For the European Statistical System, see

http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:Statistical_classification_of_products_by_activity_(CPA)

2 This is an estimate. It varies from country to another or more exactly from one National Accounts team to another.

http://ec.europa.eu/eurostat/statistics-explained/index.php/Glossary:Statistical_classification_of_products_by_activity_(CPA)

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The panorama should be completed by the connection to the IOTs: each of the Supplies and of the Uses part is connected respectively to the MAKE and USE matrices.

All in all, a complete system quickly comprises a library of a thousand of files for a single round. Knowing, especially at the beginning, that there is quickly a need of possibly ten rounds for a satisfactory equilibrium, a single year represents around 10,000 files. In an Ms-Excel approach, there is no interconnected database and any transversal data request, across the rounds, or even across the years are becoming so cumbersome by hand, other programs have to be built upon purpose. Finally, the users could spend more time on IT developments than on analysis of statistics.

HOW DO WE COVER YOUR NEEDS? Hendyplan has assembled components taking the best out of two different worlds: the database management systems and the spreadsheets. The blending is a unique amplifier of performance and comfort for the user. With SUT-Equalizer, the national accountants find the integrity of a structured information system combined to the flexibility of a tabling system.

FIGURE 3: ARCHITECTURE OF THE TOOL

MODELS• HARD EXOG.

• SOFT EXOG.

• ADJUSTED

DATA

Balance

Adjust

EQUALIZE

ITERATE AND

CONVERGE

Why is the SUT-Equalizer the solution you need?

✓ It is rational: Our methodology is the convergence of the output, expenditures and income approaches toward a GDP. This is core of the equilibrium of a national economy.

✓ It is accurate: You will be guided in all the steps of the process tables from individual products, industries and institutional sectors towards a synthetic GDP. Your team of statisticians will be guided in the analysis of all single transformations from production to final consumption.

✓ It is structuring: You receive an IT framework channelling the team of national accountants in the choice of exogenous data to be populated, in the determination of the granularity of the information according to the development of your statistical system and in the customization of the system once better information becomes available and improves the GDP understanding.

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HOW DOES THIS ARCHITECTURE GENERATE EFFICIENCY OF USAGE?

The database is the core of the architecture: it hosts data and metadata. A unique model of information is available either for the historical values, the so-called exogenous information, or for the adjusted data, by keeping the versioning. The formulas are also available as metadata with accurate concepts of raw data, calculated values, or adjusted values that might override any previous version. The models are like a template sheet in Ms-Excel: it is reusable for as many datasets as necessary. There is a library of models. They represent the economy of a product. SUT-Equalizer will merge a model sheet against the database, and the user will understand immediately what is solved and what remains to be filled.

HOW DOES THE SUTIOT-EQUALIZER SUPERSEDE MS-EXCEL?

Any sheet is a two-folded system. On the one hand, it is the mimic of Ms-Excel for the essential functionalities a SUT compilation requires: coloured cells according to the category of exogenous, or the category of endogenous (the formulas) in Ms-Excel style3, clear recognition of areas the user is allowed to change, locking mechanisms where user cannot write unless a change of model, etc. Cells with formulas may be forced as exogenous for a user intervention. Manual adjustments are highlighted. All details are kept from one session to the other. Comments are allowed on cells.

On the other hand, it is a model with equations formed by variable names and algebraic expressions. This presentation understands the mathematical constraints as a system of equations. This software infrastructure also allows the algorithms to understand inconsistencies.

FIGURE 4: THE MANUAL ADJUSTMENT ON A COMMODITY FLOW SHEET

3 A formula in Ms-Excel style is an expression with a combination of cell addresses, by row and by column.

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This dual approach of a sheet (as excel formulas and a system of equations) is the bridge between the interface and the database. There are multiple types of commodity flow sheets in this system, but they always allow both manual adjustments and automatic balancing ones. In the first category, the user reduces the big discrepancies cell by cell, whereas in the second category, a procedure that withdraws the small discrepancies. The Manual Adjustment sheet (see figure below) is a composite window with dedicated feature for an easy application of adjustments.

Details on the Manual Adjustment sheet:

▪ Exogenous are in green, different greens exist for different classes of exogenous;

▪ Formulas are in grey;

▪ At the top, a sub-sheet reports the discrepancies, live, by areas of the SUT;

▪ A specialized toolbar is also providing shortcuts to the main functionalities.

The Automatic Balancing window is similar in terms of presentation but is a more sophisticated implementation where a Plus-Minus RAS (PM-RAS) algorithm removes the small discrepancies. In all cases, the cells having received a modification are highlighted. In addition, the PM-RAS is guided by the user in a sense the possible lines from where discrepancies could be eliminated are opened to the user selection in the interface while others are locked. This sheet is a very didactic one: it informs less expert users about where to intervene.

HOW DOES THE SUTIOT-EQUALIZER REINFORCE THE TEAMWORK?

As a large disaggregated system requires lots of accurate knowledge, it becomes more likely for the compilation of the system to be distributed in a team of statisticians and economists. Typically, this system requires the intervention of compilers and of a coordinator.

A round uses a dataset of exogenous information as input coming either from the raw databases for the first iteration, or from the previous round of SUT compilation. Each member of the team of compilers works on a group of products. The system saves the name of any user making adjustments in the system. A monitoring sheet as presented below shows the progress on each product.

The final stage of the process is a validation in a buffer area at the disposal of the coordinator. Upon request, the system builds a ‘Recapitulation’ sheet, where all results by product are placed in a legible way, side by side. All these tedious manipulations, which are consuming in Ms-Excel level, are automated in SUT-Equalizer.

Figure 5 below shows a Monitoring Sheet, which is the landing sheet for any user as they launch the application.

The system integrates all the necessary functionalities in order to address the needs of the statisticians

▪ Full flexibility in the way to query the database on historical data (recovery as well as historical data),

▪ Full integration of the dissemination modules to produce results in the format you are committed to, such as Standard Data and Metadata exchange (SDMX). Notably, you are able to add the checking rules yourself, thereby improving the security of the transmission (like the tuning of the confidentiality flags before the data is disseminated).

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FIGURE 5: WINDOW AT THE OPENING OF THE APPLICATION, CALLED ‘THE MONITOR’

HOW ARE SUT-EQUALIZER AND MS-EXCEL COMPLEMENTING EACH OTHER?

Once the coordinator receives the massive dataset from the team, he/she has to evaluate the overall equilibrium and magnitude of discrepancies. At this stage, any product taken individually is at the equilibrium. SUT-Equalizer is then populating all the pieces of information in a single model in few Excel sheets. Here, the user has the full capacity to use Excel flexibility for the global tuning. It does not prevent against the general rule in SUT-Equalizer to keep permanently the integrity with the central information system. The Ms-Excel sheets are generated by the system and once the manipulations are completed, the data is returned to the database. For this reason, SUT-Equalizer and Ms-Excel complement each other.

The role of the coordinator is then to generate and discuss assumptions for a next round of adjustments once the equilibrium is not met. SUT-Equalizer finally loads the content of Ms-Excel sheets and initializes a new iteration.

The integrity of an information system and a flexibility of usage like in Ms-Excel

SUT-Equalizer is not just a software. It is an environment for SUTs and, probably in the future, for your national accounts production system as a whole.

You will trust in the power of a unique information system designed for the national accounts methodologies and for team work. It is SDMX-compliant, scalable and brings the information integrity a professional technical environment has to provide.

Do you not go naturally to Ms-Excel once the purpose is to run SUTs? This is how it works: you will interact with sheets connected to a database.

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HOW DO WE PROVIDE THE SYSTEM? SUT-Equalizer is not just a tool to set up on a computer. It is accompanied by expertise, training, and coaching. Our package is composed of:

▪ The software in its standard form;

▪ Its customizations according to your specificities, either from the IT point of view for a better integration in your environment, or from the national accountant point of view once specificities of your accounts are justifying extensions of your solving templates;

▪ Training of your IT staff for sustainable usage;

▪ Follow-up during a first year of SUT, until the full stability of the production team.

The assistance is a crucial step for a reliable process of capacity building. This assistance is a combination of visits and web-meetings for efficient knowledge transfer. The milestones of the project are:

▪ A kick-off meeting and a week for the analysis of existing local materials;

▪ A roadmap describing the steps in the construction of the SUT compilation;

▪ The organization of the exogenous variables’ collections;

▪ The implementation of the models;

▪ The previous year’s compilation in values;

▪ The compilation of the dynamic, i.e. the current year at current and previous year’s prices;

▪ The analysis of a first round with training sessions about how to analyse the recapitulation’s data and how to define scenarios toward the supra-convergence.

▪ The follow-up of the local team in running successive rounds and interventions upon purpose once it needs to solve complicated cases.

OUR FOLLOW-UP CONTINUES UNTIL YOUR TEAM BECOMES AUTONOMOUS.

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WHAT DO YOU GET? With Hendyplan SUT-Equalizer you will get:

▪ A comprehensive end-user environment for the SUT compilation;

▪ An SDMX-compatible information system, capable of dialoguing with other statistical information systems;

▪ For the first time, the full integrity between sheets like in Ms-Excel and the database, where the properties of information integrity are kept due to the combination with a Relational Database Management System (RDBMS);

▪ An encrypted methodology which enables you to apply the knowledge on your economy before the GDP figures’ publication and not, like it is done most of the time, after it;

▪ Training such that your team of statisticians controls the processes locally with sufficient autonomy;

▪ Coaching by making the practitioners able to solve complicated cases;

▪ Maintenance for an easier acquisition of the new releases of the software as we develop its functionalities on a permanent pace;

▪ Sustainability as we will help your institution staying in the dynamic of the state-of-the-art knowledge in the field.

SUT-Equalizer is your gateway to quarterly accounts, the system you need to increase the quality of your GDP production process. You will gain credibility worldwide and include your statisticians in the cycle of innovation.

SNA 2008 states that: “[14.3] Supply and use tables are a powerful tool with which to compare and contrast data from various sources and improve the coherence of the economic information system. They permit an analysis of markets and industries and allow productivity to be studied at this level of disaggregation.” and “[15.180 a)] Volume estimates of transactions in goods and services are best compiled in a supply and use framework, preferably in conjunction with, and at the same time as, the current value estimates. This implies working at as detailed a level of products as resources permit. “

SUT-Equalizer reflects exactly this international standard.

Innovation: SUT-Equalizer complies the SUT a priori for the

sake of the accuracy of GDP figures. For the first

time, you will work with the flexibility of Ms-Excel

and the rigour of a statistical information system.

SUT-Equalizer will definitely become the core

structure of your production process building the

GDP. It will be the gateway to a sustainable path

towards the quarterly accounts for your country.

Expertise: SUT-Equalizer is not “another tool”. It is a

concentration of methodology as the fruit of more

than 15 years of experience in the field.

We will train and coach you all along the road of the

technology transfer. The way we deploy the system

ensures a successful outcome since we do not only

design of an IT system, but also accompany the

practitioners through the steps to gain the

necessary knowledge and become self-proficient.

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LAST DEVELOPMENTS TOWARDS VERSION 2.0? The last developments in SUT-Equalizer are amplifying the capacity of users to manage assumptions and data releases, a crucial functionality once we understand the daily work in compiling the SUT is to find out the best and accurate datasets balancing the CF and the economy of the country.

✓ The Data Flows Dashboard: Keep the map of your transformations on eyes,

✓ The Extractor: export any information from the database to an external file, Ms-Excel,

✓ The Comparator: Compare a dataset against another one.

For example, it is possible to look at the differences between two datasets by CF, by type of valuation, anywhere

in any dataset even in the past, looking at how the status of the variables has changed (a variable is endogenous

but became perhaps exogenous), which adjustment has been made, Etc.

Empower your capacity to build assumptions

2014 2014 2014 2014

2014R01 2014R02 2014R03 2014R04

Initialisation of 2014 Second round from 2014R01 Third round from 2014R02 Fourth round

2014 2014

2014R02.01 2014R02.02

New assumptions from

2014R02

New round from

2014.R02.01

MySUTEQ connected SQLServ001

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4 SUT Equalizer: © Hendyplan International (Arlon, Belgium), 2016 and beyond

DESIGNERS’ CORNER:

FRANÇOIS LIBEAU

PROJECT MANAGER

François Libeau is founder and manager of HENDYPLAN. He is specialized in statistical information systems and econometrics/modelling. He designed, with his team, the SUT-Equalizer4 system. His main role in such a project, in addition to the core activity of a project manager monitoring the tasks and taking decisions on the evolution of the work, is to reconcile the recommendations of the field expert with the constraints of the IT specialists.

He designed and implemented numerous IT solutions for different institutions like the European Commission (and especially Eurostat), the ECB, national central banks, the IMF, etc.

François Libeau has worked on SUT-Equalizer since the beginning, especially on the

design of the underlying information system and on the user interface approach. He has

liaised the various specialties of the project, precisely by translating the SUT and National

Accounts concepts in IT objects and algorithms in an IT language for developers. He also

trains the users on the system.

ALAIN GALLAIS

FIELD EXPERT

Alain Gallais was Head of Section «Input-output table and production factors» in French NSI from 1991 to 1995, and Head of Unit “Synthesis of goods and services” between 2003 and 2006. He stayed active in the National Accounts statistics during all his career, either as short-term expert in all kinds of NA and macroeconomic fields, or as project leader in OECD for “education and health volume and price”.

He Implemented SUT in countries like France, Greece, Luxembourg, Cyprus, and cooperated on National Accounts subjects in Slovakia, Ukraine, Serbia, TRNC, etc.

The underlying methodology of SUT-Equalizer is the fruit of a comprehensive experience of

more than 25 years in National Accounts, or volume and price indicators. He is also at the

origin of a prototype of the methodology in Ms-Excel. This initiative has helped the team in

designing the environment as it is delivered to our customers nowadays.

The staff members at Hendyplan, which include statisticians, econometricians and IT specialists, are involved in the development of this product.

SUT-Equalizer is the state–of-the-art methodology

for SUT compilation. It is also an essence of

innovation inside the technological solution. This

is the tool you cannot miss to acquire for your

National Accounts Department.

HENDYPLAN International

Rue de Diekirch, 65

B-6700 Arlon

Tel: +32 63 38 62 87

Mail: [email protected]

Web site: www.hendyplan.com

Hendyplan International:

More than 25 years of experience

in the fields of statistics,

economics and finance.

François Libeau

Director of Products and Services

[email protected]

mailto:[email protected]

http://www.hendyplan.com/

mailto:[email protected]

SUT- EQUALIZER

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