1. Italian financial accounts since 1950 Riccardo De Bonis (*) Bank of Italy – Research Department (*) I wish to thank Riccardo Bonci and Massimo Coletta for their work and their useful suggestions. The views expressed in this meeting are those of the author and do not necessarily reflect those of the Bank of Italy. Paris, OECD, 9 October 2006

2. Outline 1.Motivation 2.Results and statistical issues 3.Some empirical evidence 4.Conclusions

3. The Bank of Italy started publishing financial accounts in 1963. Publications went on during the years but following different criteria. 1. Motivation Econometric exercises, economic analysis and economic historians need long time series without great statistical breaks. A recent paper by Riccardo Bonci and Massimo Coletta presented the stocks of financial assets and liabilities since 1950.

4. Yesterday: we did not have financial accounts before 1963; after 1963 statistics were produced using different methods. 1963 years ? Financial assets 1. Motivation (continued)

5. Today: financial accounts since 1950; time series are smoother. 1. Motivation (continued)  more precise analysis years Financial accounts 19501963 1995 Estimates of fin. acc. New time seriesCurrent production

6. 2.Results and statistical issues Sectors Househ olds Non financial corporati ons Financial corporatio ns General Governm ent Rest of the world Total Instruments Of which banks Gold and SDRs Currency Deposits Loans Securities Shares and other equity Mutual funds Insurance technical reserves Other assets and liabilities of which: trade credit Total

7. Caron and Cotula, I conti finanziari dell’Italia, (1971), published the stocks of Italian assets and liabilities since 1950 but only for the sum of firms and households. 2. Results and statistical issues (continued) 3. Financial accounts were built for the other sectors. 2. Firms have been separated from the households. 1.Bonci and Coletta aggregated the data following the ESA95 definitions of instruments and sectors. Of course it was not possible to apply the market value and the accrual basis criteria.

8. 2. Results and statistical issues (continued) 1963 1970 1988 1989 1994 1995 2004 1971 1963-1970 Caron and Cotula, 1971 (BI Annual Reports since ‘65) 1971-1988 BI Annual Reports: table on Italy financial assets and liabilities 1989-1994 ESA79 financial accounts (release July 1998) 1995-2004 ESA95 financial accounts (current statistics)

9. 2. Results and statistical issues (continued) After 1963 financial accounts have changed because of the introduction of new international standards such as ESA79 and ESA95. These changes affected: the classification of sectors; the details of financial instruments reported; valuation criteria (market value; accrual basis). Bonci and Coletta used the ESA95 definition of instruments and sectors. The market value and the accrual basis principles cannot be applied to the old statistics, otherwise their internal consistency becomes difficult to reach or arbitrary.

10. 2. Results and statistical issues (continued) 1963-1988:consumer households, non profit institutions serving households (NPISH) 1989-1994:consumer households, NPISH, sole proprietorships ≤ 20 employees 1995-2004:consumer households, NPISH, sole proprietorships ≤ 5 employees The definition of the household sector has undergone some changes:

11. 2. Results and statistical issues (continued) Since 1984:mutual funds; Since 1985:leasing companies, factoring firms, consumer credit companies; Since 1995:financial auxiliaries. The main changes in the financial corporations sector:

12. 3. Some empirical evidence

13. 3. Some empirical evidence (continued)

15. 4. Conclusions In a nutshell, Bonci and Coletta presented 133 historical time series covering 11 financial instruments and 7 sectors. The quality of the estimates is high for: monetary gold and SDRs, currency, deposits, loans, mutual fund shares, insurance technical reserves. Before 1995, bonds are valuated at nominal value: we prefer to maintain the internal consistency of the accounts. Not a great issue because: a) many General Government bonds have been issued before 1995 at variable rates; b) securities issued by firms were often negligible. Unquoted shares have been always valuated at market price, but different criteria have been used during the years.

16. 4. Conclusions (continued) Future agenda (conditional to resource constraints !) We would like to estimate: a) the original maturity of securities, loans and deposits following the ESA95 rules; b) financial flows since 1950. We would like to improve the estimates of trade credit (hopefully this work will be presented in 2007).

17. 4. Conclusions (continued) In December 2005 the Bank of Italy organized a conference on financial accounts, where the historical time series were made available to the participants. At the conference 11 papers were presented in four sections: the history of f.a.; the statistical methods; the evolution of the Italian financial system; the international comparisons of financial structures. The conference proceedings were published in July 2006. The volume will be translated in English (3 papers are already available). Thank you for your attention !