Item 15: Stock and Flow accounts ESTP course on National Accounts ESA 2010 Luxembourg, 15 May - 19 May 2017 Eurostat

Stock and flow accounts FLOWS (main bal. items: income, saving, B9): Transactions in goods and services Distributive transactions Financial transactions Other economic flows (price/volume changes) STOCKS (main bal. item: net worth/wealth) Stocks of financial assets / liabilities Stocks of non financial assets Non-Financial accounts Financial accounts

A map of ESA 2010: flows Production Value added Income Expenditure Saving Changes in assets & liabilities Non-financial assets Financial assets

Set of Flow Accounts Production Primary Distribution of income Secondary Distribution of Income Use of Income Capital Account Financial Account

Goods and services account Resources Uses Output Taxes on products less subsidies Imports Intermediate consumption Final consumption Gross fixed capital formation Changes in inventories and valuables Exports

I. Production account (e.g. for S11) Uses Resources Output Intermediate consumption Gross Value Added  

I. Production account (here for S1) Uses Resources Output Intermediate consumption Taxes on products less subsidies Gross Domestic Product   100% 12% 50% 62%

II.1 Primary Distribution of Income Uses Resources Compensation of employees Gross Value added Taxes on production less subsidies Gross operating surplus   ~2% ~50% ~15% ~35% 100%

II.1 Primary Distribution of Income (cont) Uses Resources Gross Operating surplus Property income (payable) Property income (receivable) Balance of primary income  

II.2 Secondary Distribution of Income Uses Resources National income / Balance of primary income Current taxes on income, wealth, etc. (payable) Current taxes on income, wealth, etc. (receivable) Social contributions and benefits in cash (payable) Social contributions and benefits in cash (receivable) Other current transfers (payable) Other current transfers (receivable) Disposable income  

II.4 Use of Income Account Uses Resources Disposable income Final consumption expenditure Change in net equity of households in pension funds Saving   100% ~75-80% ~20-25% ~1%

Changes in liabilities and net worth III.1 Capital Account Changes in assets Changes in liabilities and net worth Saving Capital transfers (payable) Capital transfers (receivable) Gross capital formation (-) Consumption of fixed capital Acquisitions less disposals of non-produced non financial assets Net lending (+)/Net borrowing (-)   ~1% ~100% -15/20% 100% 60-130% of GCF

Balance sheets Include both non-financial and financial assets, and liabilities Balance is net worth (usually not zero!) Entries valued at market prices on the day of the Balance Sheet In the ESA system can be annual or quarterly

Types of non-financial assets Non-financial produced assets Fixed assets (e.g. machines, software) Inventories Valuables Non-financial non-produced assets Natural (e.g. land, mineral deposits) Contracts, leases and licences (e.g. permits) Goodwill

Changes in balance sheets Opening Balance Sheet +/- Transactions +/- Revaluations +/- Other changes in volume Closing Balance Sheet

Revaluations “Nominal Holding Gains/Losses” (K.7) reflect changes in the level and structure of prices Can be divided into “neutral” (general price change) and “real” (specific price change) holding gains/losses; few countries do this Should ideally be measured independently, not as a residual, but not easy!

Other changes in volume - pt1 Economic appearance of assets (K.1) e.g. finding new mineral resources, a painting becomes valuable, fish breed in the open sea Economic disappearance of non-produced assets (K.2) e.g. depletion of mineral resources Catastrophic Losses (K.3) e.g. war destroys buildings, BSE destroys cows

Other changes in volume – pt 2 Uncompensated Seizure (K.4) e.g government nationalises an industry without compensation Other volume changes not elsewhere covered (K.5) e.g. abandonment of production facilities before completion or being brought into economic use, change in pension scheme model estimates Changes in classification and structures (K.6) e.g. a unit is reclassified to another sector