Fundamentals of the euro area balance of payments and international investment position
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Gabriel QuirósDG-StatisticsEuropean Central Bank
Fundamentals of the euro area balance of payments and international investment position
Joint ECB NBRM Seminar on StatisticsSkopje, 3 October 2013
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Overview
• Basic concepts
• Method of compilation of euro area aggregates
• ECB Publication
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Basic concepts
• Transactions and positions with rest of the world– Residency concept… euro area
• Methodology based on IMF Balance of payments Manual (BPM5)… move to BPM6 in June 2014
• Balance of payments– Transactions (not payments!)
•Concept: cross border, change of ownership•Time of recording: when the ownership change
•Value: transaction price • International investment position
– Outstanding amounts at market prices
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Basic concepts
• Balance of payments– Double entry system
•Each transaction is reflected in two entries (credit and debit)
•Imputed entries– Sign convention (new in BPM6)
•Net increases of assets / liabilities (+)•Net decreases of assets / liabilities (-)
– Mismatch owing to different sources: errors and omissions
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Basic concepts
• Current account– Goods– Services– Primary Income– Secondary
Income
• Capital account
• Financial account– Direct
investment– Portfolio
investment– Financial
derivatives– Other
investment– Reserve assets
• Errors and Omissions
Main accounts in the balance of payments
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Basic concepts
Relationship between balance of payments and international investment position
• Changes in i.i.p. =B.o.p. financial transactions +Changes related to exchange rates +Changes related to asset prices +Other changes (reclassifications, write-offs, etc.)
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Basic concepts
Relationship between b.o.p. and i.i.p.
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Method of compilation of euro area aggregates
• Euro area as a single economic “entity”
• Residency– Residents in euro area countries– ECB and ESM (not other EU institutions)– Importance (and complexity) of SPEs
• Transactions and positions with rest of the world (“extra euro area”) – Criterion for geographical breakdown
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Method of compilation of euro area aggregates
Euro area BOP and IIP aggregation
• In general– Euro area members compile national
BOP and IIP with a geographical breakdown (intra and extra euro area)
– Reserve assets by definition are all extra euro area (claims on non-residents of the euro area)
– Add-up extra transactions and positions– Country contributions to the aggregate
are not disclosed by the ECB
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Method of compilation of euro area aggregates
• Exception: Liabilities of portfolio investment and related income
– Difficulties to identify geographical breakdown of creditors (holders of securities)
– Deduct intra euro area assets from national liabilities
– Assumes matching of mirror data (no asymmetries!)
– Collection security-by-security and classifications with the CSDB
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Method of compilation of euro area aggregates
Basis for an accurate euro area aggregationContributions should be:• Consistent on
– methodologies and definitions– valuations– recording time– instrument and type of investment
classification• Accurate geographical breakdown• Full coverage of SPEs
– Otherwise, we accumulate errors…….
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Method of compilation of euro area aggregates
• Euro area net errors & omissions (n.e.o)= National net errors & omissions + euro area asymmetriesChart: Cumulative n.e.o. in the b.o.p. of the euro area, US, UK and Japan
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Method of compilation of euro area aggregates
• From 2007, WG-ES has worked intensively to improve the internal consistency of euro area b.o.p.
• Adjustments at euro area level (macro corrections)– Correcting for geographical allocation of loans
by non-MFIs– Grossing-up for euro area investment funds
shares held by euro area households– Use of BIS data for deposits and loans vis-à-vis
foreign banks
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Method of compilation of euro area aggregates
• Changes to national data collection and compilation methods–Transit trade treatment (services vis-à-vis non-residents)–Debtor/creditor principle –S-B-S compilation–Coverage of SPEs–Improve coverage in financial derivatives
• FDI network… –talk to the other members and share information
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ECB Publication
• Euro area balance of payments
– Monthly (7 weeks after end of period)
• Includes current account seasonally adjusted
•Monetary presentation of the balance of payments
– Quarterly geographical breakdown (4 months)
• Euro area International investment position
– Quarterly (4 months after end of period)
– Annual geographical breakdown (11 months)
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ECB publication
From 2003
• From 2006: BRIC countries + Hong Kong
From 2005
• Brazil, Russia, India, China and Hong Kong
From 2003
Quarterly b.o.p. and annual i.i.p.
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ECB Publication
• Monthly international reserves assets and foreign currency liquidity template
– Only for the Eurosystem (Central Government not covered)
• Euro area external debt
– Quarterly (4 months after end of period)
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Thanks!
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