The System of National Accounts and Policy Development.ppt

The System of National Accounts and Policy Development
with a special focus on Fiscal Policy

1. The System of National Accounts and
Policy Development
with a special focus on Fiscal Policy
November 17, 2008

2. 10/12/25Statistics Canada • Statistique Canada2
2003-4 CSNA RP Toolkit
Outline of Presentation
There are three key elements in the title of my
presentation:
•Policy Development
•Fiscal Policy, and
•National Accounts
I will first deal with them individually
Specifically, the questions are:
•What is the goal of policy development?
•Where does fiscal policy fit in?
•What does this imply for the SNA?

3. 10/12/25Statistics Canada • Statistique Canada3
2003-4 CSNA RP Toolkit

Goal of Policy Development
Improve the well-being of citizens
To achieve this, the policy suite may include:
•fiscal policy
•monetary policy
•tax policy
•financial policy
•labour market policy
•environmental policy
Each policy has a direct focus on its principal domain but
there are secondary consequences on many other
domains
By necessity, many of the consequences of policy
change, particularly the secondary ones, are understood
and taken into account only qualitatively

4. 10/12/25Statistics Canada • Statistique Canada4
Impact of Policy on Well-Being
Well-Being
Economic
W1
Social
W2
Environmental
W3
Measured
Output
Unmeasured
Output
Financial
Fiscal,
Monetary,
Tax,
Transfers
Financial
Policy
Labour
Other
Environment
Other
National Accounts
(GDP)

5. 10/12/25Statistics Canada • Statistique Canada5
Key Observations
GDP is not even a comprehensive measure of
economic output
National Accounts are used by policies other
than fiscal
There is dependence among economic policy
levers
•e.g. inefficient use of financial policy may impose an
additional burden on fiscal policy or other economic
policies
Fiscal policy only operates on measured output

6. 10/12/25Statistics Canada • Statistique Canada6
Fiscal Policy’s Precise Role
•Fiscal Policy’s direct focus is economic stabilization
OECD Economic Surveys involve assessment of a country’s
fiscal stance and risks for the near to long term, including the
complimentarity of fiscal and monetary policies
The IMF web site has many references to debates about
“rules-based fiscal policy” and the use of fiscal poilcy for
short run stimuli

7. 10/12/25Statistics Canada • Statistique Canada7
How Does Fiscal Policy Stabilize
the Economy?
The focus is on Change in GDP, rather than level
The Change in GDP automatically affects:
•revenues
•expenditures
•budget balances
•debt levels
The relationship between the change in GDP and
changes in fiscal levers may lead a government to take
proactive stance beyond automatic stabilizers
Changes in fiscal policy affect GDP:
•largely through changes in demand in the short to medium term;
and
•over the longer run, through changes in supply

8. 10/12/25Statistics Canada • Statistique Canada8
How Does Fiscal Policy Stabilize
the Economy?
However, in taking appropriate decisions, fiscal
policy further requires that:
•the output change data be available on a timely basis
and that they are trustworthy, and not be revised
qualitatively
Revisions not only raise questions of whether
policy was used appropriately or not
•they also can have a huge impact on fiscal variables
•in Canada, a 1 percentage point revision in GDP
results in a $3 billion revision in the fiscal balance (the
current surplus in 2008 is $2 billion)

9. 10/12/25Statistics Canada • Statistique Canada9
Other Uses of National Accounts
Beyond the focus of GDP Change, there is also interest
on GDP level for other policy or policy instruments e.g.
•the Canadian equalization program
•productivity level determination and comparison
This raises some interesting/important issues:
•Do technical improvements in GDP level measurement also
affect estimation of GDP change?
•Do such improvements affect timing of National Accounts data
releases?
•Do such improvements affect the degree of revisions to data?

10. 10/12/25Statistics Canada • Statistique Canada10
Conclusion
From a fiscal policy perspective, SNA revisions should
focus on:
•the quality of quarterly change in GDP
•timing of quarterly releases
•need for data revisions
Hence there’s a need to incorporate above factors in
addition to appropriate level of GDP, as considerations
for SNA revision
Other components of well being are better captured and
more useful outside the SNA framework