National Research Council. "2 CURRENT U.S. DATA SYSTEMS." Following the Money: U.S. Finance in the World Economy. Washington, DC: The National Academies Press, 1995. 1. Print.
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Following the Money: U.S. Finance in the World Economy
customs data, and the entries in banking or other financial accounts are derived from a variety of sources. Since the data or estimates used are from diverse sources, they usually cannot be reconciled exactly, leading to a balancing item representing the net errors or omissions, denoted as ''statistical discrepancy" in the accounts. The statistical discrepancy represents only the arithmetical difference between the balances of the current and the capital accounts; it does not reflect the gross errors and omissions of the different types of transactions, which may be larger than the statistical discrepancy. Gross errors and omissions in different accounts may offset one another.
An important purpose of the balance-of-payments data is to provide information needed to understand the impact of the external sector on the domestic economy. The balance-of-payments data form a key component of the national accounts, which also include the national income and product accounts (NIPA) compiled by BEA, and the flow-of-funds accounts and the balance sheets of the U.S. economy, both prepared by the Federal Reserve. The balance-of-payments data enter into these other components of the accounts; Figure 2-1 shows the sources and uses of the balance-of-payments data.
The NIPA measures the production, distribution, and use of output in the United States by four economic groups: persons, business, government, and "the rest of the world." It would be impossible to have a complete set of NIPA for an open economy without taking account of net exports and their composition. Exports of goods and services are part of the gross domestic product (GDP). Imports are part of consumer expenditures, gross domestic investment, and the other components of gross national expenditure. The difference between a nation's saving and its investment has to include net foreign investment (positive or negative) to be complete.3 During the past decade, for example, the United States financed an important part of its federal budget deficit by incurring a current account deficit, which showed up, cumulatively, as a reduction in net foreign assets. This development is reflected in the balance-of-payments accounts.4
3
Consider the basic equation: (I - S) + (G - T) + (X - M) = 0, where I is gross domestic investment, S is gross private saving, G is government spending, T is tax revenue (G - T is the budget deficit), X is exports of goods and services, and M is imports of goods and services (so that X - M is the current account position). That is, if the federal deficit is not offset by net saving in the private sector, the current account will be in deficit. This is a useful way of analyzing what is happening m a country, and it involves the balance-of-payments data.
