What are SAM?
According to Pyatt and Round (1985), a Social Accounting Matrix (hereafter, SAM) is a particular representation of the macro, meso, and micro economic accounts of a socio-economic system, which capture the transactions and transfers between all economic agents and institutions in the system1. However, a complete SAMs also can provide both descriptive and prescriptive analysis of a regional economy. In common with other economic accounting systems, it records transactions taking place during an accounting period, usually one year. Since 1960s, the initial SAM is proposed by Sir Richard Stone based on the United Kingdom and some other industrialized countries2. Where it’s further developed by the economists and policymakers from early 1970s onward and employed to analyze the poverty and income distribution issues in developing countries (Pyatt and Thorbecke, 1976).
The construction and use of SAMs was closely related to the growing dissatisfaction with the results of growth policies in developing countries (Jan, 1991). To examines these problems of government policies distributional impact, data would be required that would enable a comprehensive analysis of these aspects of the economic process. Therefore, SAMs applies together the standard macro-economic data sets summarized in the national accounts and data systems that have been designed to analyze production relations (such as Input-output tables) and income and consumption patterns (household income and expenditure surveys). On the other hand, a solid accounting and data compilation methodology to underlie both macro- and micro-economic analyses were proposed by the quality of social accounting framework (Jan, 1991). Hence, SAM was designed to combines successfully indicators of growth, income distribution and poverty into one coherent accounting framework.
History of SAM
From A Financial Social Accounting Matrix (SAM) for Luxembourg
The use of social accounting matrices (SAMs) to record the main transactions that took place in a national economy during a specific period (e.g. one year) can be traced as far back as Quesnay (1694-1774) in 1758 with his Tableau économique. In the twentieth century, social accounting was heavily influenced both by the work on national income accounts by Kuznets (1937) and that on input-output matrices by Leontief (1941). The development of SAMs such as they are used today began with the work by Meade and Stone (1941) by developing the first logically complete set of double entry national income accounts. Subsequent work by Stone (1947) resulted in the conventions for social accounting embodied in the United Nations‟ System of National Accounts (United Nations, 1953 and 1968), which is currently used throughout the world.
Usefulness of SAM
However, the widespread use of SAM started in the 1980s as a result of efforts to integrate the “social” with the “economic” dimension in policy analysis. The SAM provides a framework that integrates detailed data on production, income and expenditure, thereby allowing a systematic recording of economic transactions for the study of growth and its distribution in a particular country (Mohora, 2006). Further, a SAM also enables inter alia the identification of structural relationships between the economic agents. In the SAM the economic agents are usually classified according to the main institutional sectors3: non-financial corporations sector, financial corporations sector, households sector, government sector and the rest of the world (external) sector. The performance of each institutional sector is analysed in terms of, e.g. its contribution to net value added, expenditure, disposable income and net saving. In addition, the current external balance of the economy can be derived within the SAM. More important, the SAM represents a consistent framework, which gives a “snapshot” of the economy. It provides a clear picture of the structure of the economy at a particular point in time as well as the core data for a general equilibrium model.
what are FSAM?
Economic and social systems, subject to an increasing complexity and interdependence, require policy analysts to have high quality and reliable observations in order to properly explain, conceptualise, understand and make meaningful the underlying dynamics of the scientific material. Otherwise, unreliable and biased data can result in seriously distorted (if not altogether wrong) policy recommendations. The SAM is the framework that challenges (most of) these constraints.
In order to have a complete picture of transactions taking place in an economy, real accounts are not sufficient and need to be complemented with financial accounts.
Financial accounts form an important tool for analysing financial flows taking place between well-defined institutional sectors within the economy (non-financial corporations, financial corporations, government and households), between institutional sectors and the rest of the world, and for assessing financial interrelationships within the economy and vis-à-vis the rest of the world at a particular point in time. Because of their link to capital and use of income accounts, financial accounts are an important instrument to monitor the transmission process of monetary policy. The completeness of financial accounts enables the analysis of monetary aggregates as well as the analysis of longer-term financial investments and sources of finance. Consequently, the financial accounts provide a way of examining the financial effects of economic policy and assistance for decisions regarding future policy. The accounts can be used to investigate factors influencing the transactions in different types of financial instruments (i.e. changes in interest rates). For financial institutions, these accounts show the large amounts of funds which are channelled through them as financial intermediaries. The scale of this makes it important to be aware of changes in their sources of funds and in the use of those funds. The transactions of the financial institutions reflect the liquidity, current and capital expenditure of other sectors, and the financing of the government sector net cash requirement (EC and Eurostat, 2002).
Further, the financial balance sheets (another tool of financial accounts), show the financial wealth of each sector of the economy at a particular point in time. The changes from previous balance sheets illustrate both the change in the valuation of different instruments as stock markets move and as currency exchange rates change, but also the changing portfolios resulting from the financial transactions of the sectors. This allows measuring “wealth effects” through the change in assets‟ market prices. Regarding the structure of financial markets, the balance sheets can be used to measure: the share of different financial instruments for different sectors, the share of different sectors for different financial instruments, the degree of marketability of financial instruments and the degree of financial intermediation (EC and Eurostat, 2002).
A SAM usually encompasses a somewhat less detailed supply and use table or input-output (IO) table. A clear distinction must be drawn between the IO table and the SAM. The essence of the IO table is the way industries are interrelated through transactions, while the SAM also presents the transaction and the transfers between the different types of economic agents such as firms, government, households and the rest of the world (Pyatt, 1999). In other words, a SAM is a comprehensive, economy-wide-data framework, typically representing the economy of a nation and also providing the link between the economy and the rest of the world in terms of trade flows. A SAM has two principal objectives. The first is concerned with the organisation of information, usually information about the economic and social structure of a country in a particular year, though it could just as well be about the region of a country, a city, or any other unit one might be interested in. The unit of time is arbitrary but is usually a year. It is recognised as a sound descriptive and synoptic framework of an economy (Pyatt and Round, 1985). Furthermore, the structure and disaggregation of the SAM depends on the national socio-economic structure, modelling needs, and availability of data and resources.
Once the data in a particular country for a particular year have been organised in the form of a SAM, it presents a static image which can reveal much about the country‟s economic structure. Even so, the image is only a “snapshot”. In order to analyse how the economy works and to predict the effects of policy interventions, more is needed than just a static image. A model of the economy has to be created. This is the second objective of a SAM: to provide the statistical basis for the creation of a plausible model.
Historically, the design of a statistical information system such as SAM has evolved from the combination of two ideas: the matrix presentation of national income accounts, reflecting the Keynesian model of the markets for goods and services, and the input-output model of the structural interdependence of production in the economy. The Keynesian model divides economic activity into three categories: production; income and expenditure; and accumulation.
Accounts involved in a SAM may be real and/or financial. Real accounts are used to depict the circularity of real flows of the economy capturing all transfers and real transactions between sectors and institutions. Six major types of accounts headings are distinguished in a real SAM: (i) production activities, (ii) commodities, (iii) factors of production, (iv) current account of domestic institutions, (v) capital account of institutions (savings-investment) and (vi) external sector. Depending on analytical requirements, availability of disaggregated data, challenging problem raised in the analysis or analytical requirements, some additional accounts can be introduced and each account can be disaggregated or aggregated.
The SAM can be classified as real SAM and financial SAM, where the former records only the transactions of the real activities of the economic institutions and the latter not only records the real transactions but also the transactions taking place in the financial markets. Therefore, in the financial SAM, non-financial and financial corporations, government, households and agents from the ROW engage in transactions related to the real-side of the economy but they also own assets and incur liabilities. In this section, these additional rubrics of accounts – financial accounts – to be associated with the real accounts are presented, and this so as to obtain a complete set of accounts that represent financial SAM. Financial accounts described in this section follow ESA95 classification and accounting rules.
In general, financial accounts are an integral part of the system of national accounts. The primary function of the system of national accounts is to schematically dissect the complex workings of the economy and its basic components and thereby to facilitate the task of economic analysis. The financial flows account supplements this picture by adding those transactions which occur in the financial sphere (Deutsche Bundesbank, 2010). The consistent, homogenous and comprehensive set of financial accounts provides a useful overview of the main financial flows in the economy, as well the main risks and interdependencies between sector and financial instruments (Bê Duc and Le Breton, 2009).
The financial account deals with the financial transactions (in financial assets and liabilities) taking place between institutional units (non-financial corporations, financial corporations, government and households), and between them and the rest of the world (Eurostat and European Commission, 1996). It shows on its left side acquisitions less disposals of financial assets, while its right side shows the incurrence of liabilities less their repayment6. In other words, the financial account shows how the surplus or deficit on the capital account is financed by transactions in financial assets and liabilities. Thus, the balance of the financial account (net acquisition of financial assets less net incurrence of liabilities) is equal in value to net lending/net borrowing, the balancing item of the capital account (European Commission and Eurostat, 2002). The financial transactions are summarised and recorded systematically in the financial account. The financial account also indicates how net borrowing sectors obtain resources by incurring liabilities or reducing assets, and how net lending sectors allocate their surpluses by acquiring assets or reducing liabilities. The account also shows the contributions to these transactions of the various types of financial assets, and the role of financial intermediaries (European Commission and Eurostat, 2002). Finally, its purpose is also to provide figures on the net worth – i.e. assets minus liabilities – of institutional sectors (Lequiller and Blades, 2006).
Key Sources of Research:
Financial social accounting matrix: concepts, constructions and theoretical framework
Kai Seng Kelly Wong and Azali M. and Chin Lee
Identifying Sectoral Vulnerabilities and Strengths for the Philippines: A Financial Social Accounting Matrix Approach
Francisco G. Dakila, Jr., Veronica B. Bayangos and Laura L. Ignacio
The Financial Social Accounting Matrix for China, 2002, and Its Application to a Multiplier Analysis
Construction of Financial Social Accounting Matrix for Tunisia
Manel Ayadi Haykel Hadj Salem
Turkish Financial Social Accounting Matrix
Social Accounting Matrices for Development Planning
GRAHAM Pyatt and Round
A FINANCIAL SOCIAL ACCOUNTING MATRIX FOR THE PHILIPPINES
Vu Quang Viet, Francisco Secretario, Laura Ignacio, Marriel Remulla, Regina Juinio, and Lilia Elloso
A FinAnciAl SociAl Accounting MAtrix (SAM) For luxeMbourg
Amela HUBIC FEBRUARY 2012
A Financial Social Accounting Matrix for Pakistan
Abdul WAHEED and Mitsuo EZAKI
Is there any interdependence between the real and financial side in the Brazilian economy? A Financial Social Accounting Matrix Approach for 2005 – 2009
Real-Financial Linkages in the Canadian Economy: An Input-Output Approach
Danny Leung1 and Oana Secrieru
The Development of Fiscal Social Accounting Matrix for Indonesia
Hidayat Amir Ferry Irawan Djoni Hartono Anda Nugroho
THE USE OF SOCIAL ACCOUNTING MATRICES IN MODELING
RICHARD STONE’S CONTRIBUTIONS TO INPUT-OUTPUT ANALYSIS
GIANDEMETRIO MARANGONI AND DOMENICO ROSSIGNOLI