Integrated Macroeconomic Accounts, NIPAs, and Financial Accounts
Integrated Macroeconomic Accounts are based on:
- National Income and Product Accounts – maintained by Bureau of Economic Analysis
- Flow of funds – Financial Accounts – maintained by Federal Reserve
In addition, there are Input-Output Accounts.
Another important development was Double entry book keeping method in accounting.
From Financial Accounts of the United States – Z.1
Financial Accounts of the United States
The Statistical Release Z.1, “Financial Accounts of the United States,” is organized into the following sections:
- Matrices summarizing flows and levels across sectors, tables on debt growth, net national wealth, gross domestic product (GDP), national income, saving, and so on.
- Flows of financial assets and liabilities, by sector and by financial instrument
- Levels of financial assets and liabilities, by sector and by financial instrument
- Balance sheets, including nonfinancial assets, and changes in net worth for households and nonprofit organizations, nonfinancial corporate businesses, and nonfinancial noncorporate businesses
- Supplementary tables providing equity detail of the household and nonprofit organization sector and data on nonprofit organizations
- Integrated Macroeconomic Accounts
The Integrated Macroeconomic Accounts (IMA) relate production, income, saving, and capital formation from the national income and product accounts (NIPA) to changes in net worth from the “Financial Accounts” on a sector-by-sector basis. The IMA are published jointly by the Federal Reserve Board and the Bureau of Economic Analysis and are based on international guidelines and terminology as defined in the System of National Accounts (SNA2008).
Please see link below for more details.
Flow of Funds Accounts Process Flow
From U.S. Flow of Funds Accounts
From The Integrated Macroeconomic Accounts of the United States
The integrated macroeconomic accounts (IMAs) were developed as part of an interagency effort to further harmonize the Bureau of Economic Analysis’s (BEA) national income and product accounts (NIPAs) and the Federal Reserve Board’s (FRB) flow of funds accounts (FFAs). Work began on these accounts in 2002 and the first version of the tables was presented at the NBER Conference on Research in Income and Wealth, Architecture for the National Accounts in April 2004, with annual data for 1985 to 2002.2 A February 2007 Survey of Current Business article officially introduced the regular production of the IMAs.3 The System of National Accounts, 1993 (SNA) was used as the organizing framework in an effort to bring these accounts into closer accordance with international guidelines. While the resultant set of IMAs are largely in accordance with the SNA, there remain differences, particularly with respect to the way sectors are defined. The IMAs use a consistent set of sectors throughout the entire sequence of accounts, and these sectors are primarily based on definitions used in either the NIPAs or FFAs. In the SNA, institutions are grouped into five mutually exclusive sectors: 1) nonfinancial corporations, 2) financial corporations, 3) general government, 4) nonprofit institutions serving households (NPISH), and 5) households. In the IMAs, estimates are calculated and presented for the following seven, mutually exclusive sectors: 1) households and NPISH, 2) nonfinancial noncorporate business, 3) nonfinancial corporate business, 4) financial business, 5) federal government, 6) state and local government, and 7) rest of world. The primary difference is in the treatment of noncorporate business (which includes entities such as sole proprietorships, general partnerships, and limited liability partnerships, and government enterprises), which, with the exception of government enterprises, are classified as either nonfinancial noncorporate business or financial business in the IMAs. Government enterprise activities are reflected in the government sectors within the IMAs. In contrast, in the SNA, limited liability companies, limited partnerships and government enterprises are classified as “quasi-corporations” in the financial or nonfinancial corporate sectors and general partnerships and sole proprietorships are classified in the household sector.
Most of the IMA series are derived from published NIPA and FFA data. Current account and capital account statistics are based on NIPA data, while the financial account statistics are based on FFA data. The other changes in volume, revaluation, and balance sheet accounts reflect a combination of both BEA and FFA data. BEA provides FRB with unpublished data, where necessary, and the FRB is responsible for compiling the full set of integrated accounts. The IMAs are updated quarterly about 75 days after the end of the quarter and are published by both BEA and FRB. The BEA-supplied statistics for the most recent quarter typically reflect revisions to the previous quarter, with more substantial historical revisions stemming from the NIPA annual revision introduced with the September IMA release. The FRB-supplied statistics are not constrained by a set revision cycle and thus are open to historical revisions with each quarterly update.
Bureau of Economic Analysis (BEA) Publishes
- GDP and Personal Income
- Fixed Assets
- GDP by Industry
- International Transactions, Services, and IIP
- Direct Investments and MNEs
- GDP and Personal Income
GDP and Personal Income data includes
- Gross domestic product (GDP)
- Gross domestic income (GDI)
- National income
- Corporate profits
- Government receipts and expenditures
- Personal income and disposable personal income
- Personal consumption expenditures (PCE), or consumer spending
- Personal saving
From A Guide to the National Income and Product Accounts of the United States
The estimation of national income was initiated during the early 1930s, when the lack of comprehensive economic data frustrated the efforts of Presidents Hoover and Roosevelt to design policies to combat the Great Depression. In response to this need, the Department of Commerce commissioned Simon Kuznets of the National Bureau of Economic Research (NBER) to develop estimates of national income. Professor Kuznets headed a small group within the Bureau of Foreign and Domestic Commerce’s Division of Economic Research. Professor Kuznets coordinated the work of researchers at the NBER in New York and his staff at Commerce. The estimates were presented in a report to the Senate in 1934, (National Income, 1929–32.)
The entry of the United States into World War II led to increased demand for data that could be used for wartime planning. Early in 1942, annual estimates of gross national product (GNP) were introduced to complement the estimates of national income. In addition, estimates were developed to detail how income was generated, received, and spent by various sectors of the economy.
The U.S. national income and product statistics were first presented as part of a complete and consistent accounting system in the July 1947 supplement to the SURVEY OF CURRENT BUSINESS. The supplement contained 48 tables covering the years 1929–46. All estimates were presented in current dollars; no adjustments were yet made for changes in purchasing power. Quarterly estimates were available for only a few of the aggregates (national income, GNP, and personal income, and their major components). Monthly estimates were presented for personal income and its major components.
In 1951, annual estimates of real GNP and of implicit price deflators were introduced as supplementary tables. Real GNP was calculated by holding fixed the prices of a particular base year that is—GNP was calculated in “constant dollars.” In 1954, these inflation- adjusted estimates were formally integrated into the standard NIPA tables.
Another revision, published in 1958, introduced changes in the accounting system and added new information to the accounts. Five summary accounts were adopted as a concise, general presentation of output, income, outlays, foreign transactions, saving, and investment. Quarterly estimates of real GNP were introduced. Government sector tables provided a new breakdown of expenditures by type and function for the Federal Government and for state and local governments. The foreign transactions tables were expanded in detail and integrated with the balance of payments accounts. Regional estimates were introduced, as were estimates of the net stock of fixed assets in manufacturing.
In the 1965 comprehensive revision, for the first time, the components of GNP were benchmarked to the detailed estimates contained in the 1958 input-output table, which provided a better understanding of the structural relationships within the economy.
During the 1960s and 1970s, the estimates of capital stock were expanded to cover all business and government owned fixed assets and consumer durable goods. In 1976, in order to provide a more consistent valuation, the estimates of consumption of fixed capital (CFC) were shifted to a current-cost basis. Previously, the estimates were on a book-value basis—that is, valued at historical cost—reflecting a mixture of prices for the various years in which the assets were acquired.
In 1985, BEA introduced quality-adjusted price indexes for computers and peripheral equipment that were developed with the assistance and advice of re- searchers from the IBM Corporation. The indexes, which were based on a statistical technique known as “hedonic” regression, adjusted for the rapid improvements in speed and capacity of computer equipment. These hedonic price indexes provide improved measures of price change for computers and peripheral equipment during periods when quality characteristics change rapidly and when prices decline as new products are introduced.
In 1991, BEA changed its featured measure of U.S. production from GNP to GDP. GDP covers the goods and services produced by labor and property located in the United States and is thus consistent with key economic indicators of employment, productivity, and industry output. The change also facilitated comparisons of economic activity in the United States with that in other countries.
In 1993, the System of National Accounts 1993 (SNA 1993) was adopted by the international community in order to facilitate international comparisons of national economic statistics and to serve as a guide for countries as they develop their economic accounting systems.1 BEA actively participated in preparing SNA 1993 and announced its plan to move toward consistency with SNA 1993. Since then, the major improvements in the NIPAs have been designed, at least in part, to incorporate the SNA’s concepts and definitions wherever feasible.2
In 1996, BEA introduced several major improvements to the NIPAs. BEA began estimating the changes in real GDP and its components by chaining together year-by-year quantity changes that were calculated using the Fisher index formula, rather than estimating real GDP on the basis of prices of a single, arbitrary base year.3 Government expenditures for equipment and structures were recognized as fixed investment, thereby providing a more complete measure of investment through the consistent treatment of fixed assets whether purchased by the public or the private sector. The method for calculating CFC was changed to reflect the results of studies on the prices of used equipment and structures in resale markets that found that depreciation generally tends to follow a geometric pattern.
The 1999 comprehensive revision of the NIPAs further improved the definitions underlying the accounts and the statistical underpinnings of the current-dollar estimates, quantities, and prices in the accounts. For example, business and government expenditures for software were recognized as fixed investment. Government employee retirement plans were reclassified so that they would be treated similarly to private pension plans. A new method was introduced for calculating the real value of unpriced bank services by incorporating measures of banking activity. The consumer price indexes that were used for deflating personal consumption expenditures (PCE) were revised back to 1978 to reflect the use of a geometric mean formula.
The most recent comprehensive revision of the NIPAs, which was released beginning in 2003, further improved and updated the accounts.
In 2004, BEA participated in a Conference on Research in Income and Wealth on “A New Architecture for the U.S. National Accounts.”11 The purpose of the conference was to initiate the development of a comprehensive and fully integrated set of U.S. national ac counts. Conference participants identified short-term and long-term initiatives to more fully integrate the existing sets of accounts, to uncover gaps and inconsistencies, and to expand and integrate systems of non- market accounts with the core system. As part of this exercise, participants identified initiatives to integrate BEA’s existing set of accounts with other U.S. economic accounts, including the productivity accounts prepared by the Bureau of Labor Statistics and the flow of funds accounts prepared by the Federal Reserve Board.
Simon Kuznets and Richard Stone: National Income Accounts
From Taking the Pulse of the Economy: Measuring GDP
National income and product accounts—best known by one of their principle aggregates, gross domestic product (GDP)—are produced by virtually every nation in the world. Simon Kuznets and Richard Stone, both later to become Nobel Prize winners, led the creation of the national accounts for the United States and the United Kingdom, respectively.
From THE NATIONAL ACCOUNTS AS A TOOL FOR ANALYSIS AND POLICY; PAST, PRESENT AND FUTURE
The development of national accounting systems occurred simultaneously in Britain, the Netherlands and the Scandinavian countries. This development was closely linked with three other major innovations in economic theory in the 1930s: input-output analysis, econometric modelling of the whole economy and the Keynesian revolution.
From VALUE AND INCOME IN THE NATIONAL ACCOUNTS AND ECONOMIC THEORY
National accounting and economic theory have a long joint history, both in persons and in concepts.’ Some important cases in point are:
- King and Petty are not only the founding fathers of national accounting, but should also be remembered for their contributions to economic theory.’ King’s law of demand can be regarded as the first statistical demand curve. Petty is known for his work on the velocity of money. He also acknowledged the importance of the concept of human capital, by making an estimate of its value in England.
- Kuznets’ work on economic growth and historical time series has been important to both national accounting and economic theory. The same applies to Leontief’s pathbreaking work on input-output analysis.
- Hicks and Frisch are generally known for their contributions to economic theory and econometrics. However, they also made important contributions to national accounting.
- The reverse situation holds for Stone: his role in the development of international guidelines on national accounting is his most outstanding contribution but he should also be remembered as one of the pioneers of econometrics.
- The Keynesian revolution was important to both economic theory and national accounting. It stimulated the development of the national accounts all over the world. The drastic increase in the availability of national accounts figures reinforced the Keynesian revolution in economic theory (and policy). Furthermore, during the Second World War, Keynes, at that time a high ranking official in the U.K., asked Stone and Meade to develop and estimate a system of national accounts for improving the planning of the war budget.
Since the Second World War, the role and nature of national accounting has drastically changed. National accounting has become well-established and institutionalized.
From Three centuries of macro-economic statistics
Simon Kuznets (see e.g. Kuznets, 1941) reconstructed national income and product accounts for the USA, first back to 1919 and eventually back to 1869. Such impressive measurement exercises were the input for investigating business cycles and long term economic growth. For example, what was the role of the various industries, what was the role of technology and innovations, what is the relationship between economic growth and inequality (the U-shaped Kuznets-curve) or between economic growth and urbanization, traffic congestion and pollution. These examples also illustrate that Kuznets was very well aware of the major differences between economic growth and welfare. According to Kuznets “As a general formula, the desirability of as high and sustained a growth rate as is compatible with the costs that society is willing to bear is valid, but in using it to judge economic problems and policies, distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long run”.
From THE NATIONAL ACCOUNTS AS A TOOL FOR ANALYSIS AND POLICY; PAST, PRESENT AND FUTURE
Wassily Leontief and Input Output Accounts
In 1936, Leontief published an article, which started input-output analysis (Leontief, 1936). For this major innovation, Leontief was later awarded the Nobel Prize. Input-output analysis started not fully out of the blue. Precursors can be found amongst other things in Quesnay’s zigzag diagram (“Tableau Economique”) and some of the equations relating input and output by Walras (see Stone, 1984). The crucial innovation contained in Leontief’s article was that it formulated for the first time a “model connecting inputs and output, which made it possible to calculate indirect as well as direct inputs and thus to carry out the many, now familiar, analyses which depend on being able to do this” (see Stone, 1984).
Commodity-flow accounting can be regarded as the statistical counterpart of input-output analysis, as commodity-flow accounts are a type of input-output table. Commodity-flow accounting started in Sweden (Lindahl), Denmark (Kampmann) and the United States (Kuznets). In Sweden, the results of a ten-year project under the direction of Lindahl were published in 1937. In this monumental and well-thought out study, the inputs of industries were calculated by some form of commodity-flow analysis, i.e. as the sum of inputs received by that industry from other industries as computed from the production statistics of the other industries (adjusted for imports and exports). The Swedish study inspired work in Denmark by Kampmann on input-output tables, that included also estimates on national aggregates in constant prices. More information on these developments in Scandinavia can be found in Aukrust (1994, pp. 26-31).
In the forties and fifties, input-output analysis was developed more fully and many of its applications were proved to be successful analytical tools. In the international guidelines of 1968, input-output tables were explicitly linked to national accounting (see sections 3.2 and 3.3).
In the 1950s, the development of input–output accounts by Leontief and others provided a conceptual framework for estimating the size of the economy by an income measure, by an expenditure measure, and also by a third method—a value-added measure. In 1964, the Bureau of Economic Analysis published its first input–output account that was directly tied to the national accounts (Goldman, Marimont, and Vaccara, 1964). The input– output table calculates GDP by three interlocking methods. First, it estimates each industry’s gross output and subtracts intermediate inputs from other industries to derive each industry’s residual value-added, which can be summed in what is sometimes called the “production approach” to estimate GDP. A second approach to estimating GDP, the “income approach” measures the income earned by the different factors of production. The third approach, the “final expenditures approach,” shows what is happening across different types of spending such as con- sumption, investment, and exports less imports. Table 1 shows the main categories within these three methods of measuring GDP for 2005.
Please see my earlier post on Input Output Accounts
Morris Copeland and Flow of Funds Accounts
From The Origins of Financial Accounts in the United States and Italy: Copeland, Baffi and the Institutions
Copeland’s work ties in with various lines of analysis. The first connection is with the developments in national accounts that followed Keynes’s General Theory. Keynes invented not only a discipline, but also the words to describe it, setting the national accounts on a new basis. Their construction was not an easy one. Blanchard (2000) described macroeconomics before the Second World War as ‘an age of confusion’. During the interwar years progress in national accounts can be attributed to Colin Clark and Simon Kuznets.1 According to Patinkin (1982), the work of Clark and Kuznets was a statistical revolution that anticipated the Keynesian one.2 Later on, in 1942, Hicks published the first edition of The Social Framework. A major effort of organisation produced the United Nations’ System of National Accounts (SNA) of 1947, strongly based on Richard Stone’s paper (1945) on ‘Definition and Measurement of the National Income and Related Totals’. Copeland had already studied the national accounts before the Second World War, publishing papers in the NBER series Studies in Income and Wealth. His essays of 1935, ‘National Wealth and Income – An Interpretation’, and 1937, ‘Concepts of National Income’, were cited by Stone in the preparatory work for the SNA. Copeland’s view was that the estimation of national income could benefit from the use of a double-entry bookkeeping system, i.e. of the approach he would apply for his future moneyflows. During the Second World War, statistical work on national accounts received a tremendous impulse (see Carson 1975). After the focus on the ‘inflation gap’, i.e. the amount by which the real GDP exceeds potential GDP, it became natural to ask questions concerning the spending capacity (and therefore the financial situation) of the different sectors of the economy: households, firms, government, financial intermediaries, the rest of the world. In other words, when the concepts of national income and other non-financial accounts had been codified, it was a consequent, yet complex, step to move on to the notion of financial accounts.
From Credit Aggregates from the Flow of Funds Accounts
The FOFA are based on research by Morris A. Copeland (1952), who had been studying financial flows when the NIPA became available in the early 1930s. With his training in accounting and with the NIPA in mind, Copeland began to calculate financial flow measures for the banking sector, and then, over a decade later, he compiled aggregate data for all sectors. In 1944, the National Bureau of Economic Research invited Copeland to develop a more complete system to account for financial flows. Copeland accepted the invitation, and in 1952, the Bureau published the results: U.S. financial flows and related balances for 1936 through 1942.
The Board of Governors of the Federal Reserve System continued the project and presented the result of its efforts in late 1955 in Flow of Funds in the United States, 1939–1953. The data, however, were on an annual basis and available only with a substantial time lag. In 1959, the Federal Reserve published a revised presentation with quarterly data. Since then the Federal Reserve has published regularly quarterly FOFA data.
Concepts of Level and Flow in the SNA and the Financial Accounts
From Financial Accounts
The level of an asset or liability (also referred to as the stock or outstanding) measures the value of the asset or liability in existence at a point in time. In the “Financial Accounts,” the levels are reported as of the end of each calendar quarter. In the SNA2008, the change in the level from one period to the next is called the “economic flow,” and can be decomposed into three broad elements: transactions, which measure the exchange of assets; revaluations, which measure changes in market value of untraded assets; and other changes in volume, which measure discontinuities or breaks in time series due to disaster losses or a change in source data or definition.
In the “Financial Accounts,” “flows” refer to the exchange of assets, corresponding to the SNA definition of transactions, that is, “flow tables” in the “Financial Accounts” are equivalent to “transaction tables” in the SNA terminology. In practice, other volume changes are relatively rare, and revaluations occur mainly for series carried at market value (such as corporate equities, real estate, and some debt securities), so for many series the change in the level is equal to the flow.
Please see my earlier post on Morris Copeland and Flow of Funds Accounts
- J M Keynes (UK)
- Ragnar Frisch (Norway)
- Richard Stone (UK)
- Colin Clark (UK)
- Simon Kuznets (USA)
- James Meade (UK)
- Wesley Mitchell (USA)
- Morris Copeland (USA)
- Wassily Leontief (USA)
- Irving Fisher (USA)
Key Sources of Research:
Enhanced Financial Accounts
U.S. Flow of Funds Accounts
by Susan Hume McIntosh and Elizabeth Ball Holmquist,
U.S.Board of Governors of the Federal Reserve System
The Origins of Financial Accounts in the United States and Italy: Copeland, Baffi and the Institutions
Riccardo De Bonis and Alfredo Gigliobianco
An Integrated Framework for Financial Positions and Flows on a From-Whom-to-Whom Basis: Concepts, Current Status, and Prospects1
Prepared by Manik Shrestha, Reimund Mink,2 and Segismundo Fassler
Expanding the Integrated Macroeconomic Accounts’ Financial Sector
By Robert J. Kornfeld, Lisa Lynn, and Takashi Yamashita
Financial Subsectors in the Integrated Macroeconomic Accounts
by Robert Kornfeld, Lisa Lynn, and Takashi Yamashita Bureau of Economic Analysis
May 5, 2015
US Flow of Funds
Flow of Funds
– Overview of Japan, the United States, and the Euro area –
Credit Aggregates from the Flow of Funds Accounts
Milton P. Reid, III and Stacey L. Schreft
The Making of America’s Imbalances
February 3, 2014
Integrated Macroeconomic Accounts for the United States
National Income and Product Accounts – BEA
The Integrated Macroeconomic Accounts of the United States
McIntosh, Susan Hume Holmquist, Elizabeth Ball
The Integrated Macroeconomic Accounts of the United States
Marco Cagetti, Elizabeth Ball Holmquist, Lisa Lynn, Susan Hume McIntosh, and David Wasshausen
Stone, John Richard Nicholas (1913–1991)
System of National Accounts 2008 – 2008 SNA
NATIONAL ACCOUNTS: A PRACTICAL INTRODUCTION
Understanding National Accounts
Kuznets and Modern Economic Growth Fifty Years Later
Moshe Syrquin University of Miami
THE NATIONAL ACCOUNTS AS A TOOL FOR ANALYSIS AND POLICY; PAST, PRESENT AND FUTURE
EU ESA 2010
A New Architecture for the U.S. National Accounts
Dale Jorgenson, J. Steven Landefeld, and William D. Nordhaus, editors
A NEW ARCHITECTURE FOR THE U.S. NATIONAL ACCOUNTS: A REPLY TO ANDRÉ VANOLI
The National Income and Product Accounts and the System of National Accounts 2008
Comparison and Research Plans
By Stephanie H. McCulla, Karin E. Moses, and Brent R. Moulton
SIMON S. KUZNETS 1901–1985
A Biographical Memoir by
ROBERT W. FOGEL
Political Arithmetic: Simon Kuznets and the Empirical Tradition in Economics
Robert William Fogel, Enid M. Fogel, Mark Guglielmo, and Nathaniel Grotte
The History of National Accounting
Three centuries of macro-economic statistics
VALUE AND INCOME IN THE NATIONAL ACCOUNTS AND ECONOMIC THEORY
Mirrors of the Economy: National Accounts and International Norms in Russia …
By Yoshiko M. Herrera
The Accounts of Nations
By Zoltan Kenessey
THE EVOLUTION OF MODERN ECONOMIC ACCOUNTS
JOHN W. KENDRICK
The New System of National Accounts
edited by John W. Kendrick
National Accounting at the beginning of the 21st century: Wherefrom? Whereto?
“National accounting, history of.”
The New Palgrave Dictionary of Economics, Second edition.
http://www. dictionaryofeconomics. com/article (2008).
Vanoli, André (2002):
A History of National Accounting, Amsterdam, IOS Press, 2005
Taking the Pulse of the Economy: Measuring GDP
J. Steven Landefeld, Eugene P. Seskin, and Barbara M. Fraumeni
A Guide to the National Income and Product Accounts of the United States