The Overview of GDP Estimates and Related Issues in China Discussant comments Session: Recent...

The Overview of GDP Estimates and Related Issues in China

Discussant commentsSession: Recent Developments in the NBS (I) Tuesday, December 1, 2009

Kim ZieschangIMF Statistics Department

The 13th OECD-NBS Workshop on National Accounts

Haikou, ChinaNovember 30-December 4, 2009

The views herein are those of the author and should not be attributed to the IMF, its Executive board, or its management

December 1, 2009 Discussion: Overview of GDP Estimates and Related Issues in China

2

Institutional units versus activity units

NBS question 1: How can data on activity units be collected if sources provide information only on institutional units (i.e., enterprises rather than establishments) Sample surveys of enterprises identifying

the establishments they own? Single physical location, producing one or a few

types of output


3

Owner occupied housing services output

NBS question 2: How should depreciation be calculated for owner occupied housing? Output is the aggregate depreciation of

the owner occupied housing stock Volume of output proportional to area of

dwellings Price index proportional to depreciation

per unit area of dwellings


4


Restatement: How should rentals be calculated for owner occupied housing? Two approaches Rental equivalence User cost of capital


5


Rental equivalence Equivalent rents for types of owner

occupied units my be hard to find in a given market area, so, alternatively use

User cost of capital Depreciation Plus interest cost of invested funds Minus expected appreciation in the prices

of owner occupied dwellings


6


User cost of capital, continued If the user cost method is followed, using only

depreciation is equivalent to saying that the interest cost of invested funds less expected appreciation (the real interest rate) is zero Overstates current price output level if real interest

rate is negative Understates current price output level if real interest

rate is positive Overstates current price output growth if real interest

rate is falling Understates current price output growth if real interest

rate is rising


7

Owner occupied housing services output These are primarily housing price rather than

volume effects Output volume growth is fundamentally the

weighted average increase in the aggregate area (size) of the housing stock, controlling for the mix of types of unit It is important that housing stratified by type of unit Weighting of growth in certain types of housing is

important to the accuracy of the estimate of total volume growth in owner occupied housing services

The rental estimate is important to these weights whether by equivalent rent or user cost


8

Real estate development

NBS question 3: Financial statements of real estate development companies do not strictly reference activity from the current period, but also include activity from past periods Have I got the problem correctly stated? Further explanation of the problem with

the data?


9

Some further observations: FISIM output at current prices

NBS approach to financial intermediation services indirectly measured (FISIM) Loans:

loan interest receivable – reference rate annual average value of loans

Deposits: reference rate annual average value of deposits – deposit interest payable

Reference rate = (deposit rate + loan rate – risk premium)/2


10


Comment Reasonable approach which allows the average term

structure of loans relative to deposits to affect the allocation of FISIM between loans and deposits Loan rate minus risk premium differs from deposit rate

because of difference in maturity of loans versus maturity or duration of deposits, among other things

The risk premium stays in FISIM as compensation for risk bearing Most of the risk bearing charge probably covers the

equivalent value of insurance against term and loan default risk

The rest of the risk bearing charge is paid to the stockholders for bearing risk as a primary input service

The amount of the risk premium to be included in FISIM is currently under discussion in the ISWGNA as part of the 2008 SNA Research Agenda


11


Loans rate Reference premiumRisk rate Bond

Loans 2/rate Bond rateDeposit premiumRisk rate Bond

Loans 2/premiumRisk premiumRisk rate Bond rateDeposit

premiumRisk maturity) (same rate Bond t)(Governmen

Loans 2/premiumRisk rateLoan rateDeposit rateLoan

Loans rate Reference rateLoan

FISIMloan NBS

… so NBS loan FISIM fully reflects the risk premium because the reference rate is effectively risk free. Paragraph 6.166 of the 2008 SNA is somewhat ambiguous about whether risk is in or out of the reference rate. The 2008 SNA Research Agenda will aim to clarify this.


12


Questions How is the loan risk premium estimated? Should FISIM for loans be calculated on

the market or fair value of loans rather than the contract value (which is the SNA’s valuation of loans on the balance sheet)


13

Some further observations: FISIM output price and volume

NBS FISIM price index: the unweighted average of the interest rate index for deposits maturing in 1 year and the interest rate index for loans maturing in 1 year A “reference rate” index?

Weight of FISIM in NBS estimate of total financial services output is proportional to net interest receivable


14


Question: is this consistent with the current price value of FISIM? Could average of index of the reference rate minus the

deposit rate and index of the loan rate minus the reference rate be used instead of the average of indices of deposit and loan interest rates?

Could the weight of FISIM be FISIM rather than net interest receivable? FISIM is close to net interest receivable on loans and

deposits if total loans are close to total deposits, but the difference increases with total loans minus total deposits

Could interest rates and FISIM calculations for more maturities than one year be considered?


15


Question: Should the FISIM deflator not only depend on interest rates but also include either Average deposit size and average loan size?

Implication: output is a weighted average of the number of deposit accounts and number of loan accounts

Or, a general price index, such as the consumption and capital formation deflator used for “other financial services?”


16


.preferably

Tornqvistor idealFisher :used be could Laspeyres besides indices priceOther

index. price general aor e)(fair valu sizeloan average theis and

index price general aor sizedeposit average theis where

rate ReferencerateLoan

rate ReferencerateLoan

FISIM Total

loans FISIM

rateDeposit rate Reference

rateDeposit rate Reference

FISIM Total

deposits FISIM

index price Laspeyres FISIM

,1

,1

,1111

1

,1111

1

ttLoan

ttDeposit

ttLoantt

tt

t

t

ttDeposittt

tt

t

t

P

P

P

P


17

In closing

Thank you for the opportunity to learn about China’s national accounts and to offer some approaches to the methodological and data problems NBS faces in compiling them

The Overview of GDP Estimates and Related Issues in China Discussant comments Session: Recent...

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