The Meaning of Balance of Payments Statistics

[hotlip]

WP/94/131-EA
The Meaning of Balance of Payments Statistics
in an Interdependent World by Jack Bame

The adequacy of available international economic data--in particular,
the balance of payments and international investment position, which
constitute the standard set of international accounts--has recently been the
subject of widespread criticism. Several studies have proposed that other
data be integrated with these accounts and/or that the residency criterion
be revised or replaced by an ownership criterion. Such proposals, if
accepted, would compromise the structure of both international and national
accounts. Given that the two most important international standards for
measuring these accounts--the 1993 System of National Accounts (SNA) and the
fifth edition of the IMF Balance of Payments Manual--were recently issued
and closely harmonized, efforts to change them would be misguided.

The central role of residence is identical in both sets of guidelines
because the residency status of producers in an economy determines the
limits of domestic production, affects the measurement of GDP--among other
variables--and is the basis for compilations of balance of payments
transactions and for the rest-of-the-world sector in the national accounts.
Nonetheless, it is recognized that no one statistical measure can satisfy
all possible purposes. The development and use of complementary or
supplementary data is therefore both necessary and valuable for policy
purposes, in particular, for trade negotiations. However, if such data are
combined with standard measures to derive new net balances (e.g., for
transactions in international goods and services), they should not be
confused with, accorded the same weight as, or take precedence over, the
standard measures.

It is more important for countries to adhere to the conceptual,
definitional, and classification standards of the SNA and the Balance of
Payments Manual than to revise or adjust standard measures. Such
conformity can help reduce existing bilateral, regional, and global
asymmetries in the international accounts and thereby improve the
statistical basis for analysis and policy formulation.

Significant international, regional, and national initiatives are under
way to refine and improve the coverage and measurement of international
transactions within the framework of the Balance of Payments Manual and the
SNA. Increasingly, partner countries are working toward harmonizing and
exchanging data. These developments will enhance the relevance and
usefulness of the standard measures. This is not to say that the structure
and concepts of the Balance of Payments Manual and the SNA should not be
reassessed at some future time, and certainly within a shorter interval than
the 16 years and 25 years, respectively, between the previous and latest
editions of the two international standards.