Week 5 Lectures on Macroeconomic Accounts and Policies (v.1) PDF

Lectures on Macroeconomic Accounts and Policies Prof. Mohamad Ikhsan Real Sector  The Main Macroeconomics Aggregates The System of National Accounts (SNA): an accounting framework for macroeconomic data that is compiled and presented for economic analysis. This financial for the analysis,...

Lectures on Macroeconomic Accounts and Policies Prof. Mohamad Ikhsan Real Sector  The Main Macroeconomics Aggregates The System of National Accounts (SNA): an accounting framework for macroeconomic data that is compiled and presented for economic analysis. This financial for the analysis, evaluation, and monitoring of a country's economic performance. Gross Output : The value of all goods and services produced in an economy. Value Added (VA) : The value derived from Gross Output after subtracting the value of intermediate consumption. Consumption (C) is divided into two different types: Intermediate Consumption: Intermediate consumption refers to inputs in production. Final Consumption: Final consumption refers to goods and services, both imported and domestically produced, that are used by households and the government sector. 4  The Main Macroeconomics Aggregates Gross Investment: It pertains to the increase in the physical capital stock in an economy. Depreciation: used to distinguish net investment from gross investment. Net investment: a more accurate measure for assessing the addition to production capacity than gross investment. Net Investment = Gross Investment – Depreciation Net Domestic Product (NDP) = GDP – Depreciation Absorption (A): As domestic aggregate demand. A=C+I Net Exports (X-M): Net exports are calculated as the value of exports of goods and services minus the value of imports of goods and services. 5 The Circular Flow of Income and Spending 6  Alternative Approaches to Measuring GDP Production Approach: GDP (at market prices) = sum of value added across all sectors of the economy + (taxes – subsidies on products). Income Approach GDP (at market prices) = compensation of employees + rent + interest + profits + (taxes – subsidies on products). Expenditure Approach GDP (at market prices) = C + I + (X-M) = A + (X-M) 7  Other Aggregates Gross National Income (GNI): (formelly called Gross National Product, GNP) GNI = GDP + Net factor income from abroad (Yf) Gross National Disposable Income (GNDI): GNDI = GNI + Net current transfers from abroad (TRf) Gross National Saving (S): S = GNDI – C 8  Basic Accounting Relationship Absorption, Income and the current account balance GDP = C + I + (X-M) = A + (X-M) GNDI = GDP + Yf + TRf = A + (X –M ) + Yf + TRf But current account balance (CAB) = X – M + Yf + TRf Therefore, GNDI = A + CAB GNDI – A = CAB Saving, investment and Current Account Since GNDI – C – I = CAB 9  Real Vs Nominal Magnitudes Current Vs Constant Prices o Nominal GDP : Measures the value of the output of the economy at current prices. o Real GDP : Measures the value of the output of the economy using the prices of the fixed base year. Implicit GDP Deflator GDP deflator: (Nominal GDP/Real GDP) * 100 Index that measures the average price level of an economy’s output relative to a base year. 10  Measuring Inflation Inflation: Sustained and persistent increase in an economy’s overall price level. Measures of Inflation a) Consumer Prices Index (CPI) b) GDP Deflator c) Wholesale Price Index Differences: a) Types of goods and services covered. b) GDP deflator includes only domestically produced goods. c) Prices of goods are aggregated differently 11 Inflation: Consumer Prices Index 12 Inflation: GDP Deflator 13 Inflation: Wholesale Price Index 14 Inflation Indonesia: 2000-2022 15 External Sector External Sector Dasar-Dasar Balance of Payments Balance of Payments/BOP (ID: Neraca pembayaran) records the flows of foreign funds in and out of the economy. The accounts are done based on residency of the agents Transactions refer to a certain period of time (year, quarter) Transactions should be valued using market prices BOP: a f.o.b. (free on board) basis for both exports and imports Imports are often recorded on a customs-basis c.i.f. (including the cost of international insurance and freight). However: Exports and imports of goods, f.o.b., are shown in the “Trade” section of the Current Account. The insurance and freight components of imports are recorded under ”Services. Unit of account: the national currency or a stable foreign currency (typically US Dollar) 17 External Sector Dasar-Dasar Balance of Payments Both contracts generally specify origin and destination information that is used to determine where liability officially begins and ends. CIF: Seller responsible until buyer receives the goods FOB: Buyer responsible for costs/liabilities during the shipping 18 External Sector Komponen dalam BOP (BPM6) Current Account (surplus +, deficit -) Exports of Goods and Services Imports of Goods and Services Primary Income (net) Secondary Income (net) Official Private Capital Account (surplus +, deficit -) Financial Account Direct Investment Portfolio Investments Financial Derivatives a.o. Other Investments Net Errors and Omissions Overall BOP Balance (surplus +, deficit -) Change in Reserve Assets (increase +, reduction -) 19 External Sector Current Account 20 External Sector Capital and Financial Account Capital Account/Transaksi Modal (biasanya bernilai sangat kecil) Capital transfers and Gross acquisitions/disposals of nonproduced nonfinancial assets (Hibah investasi & Jual beli aktiva tetap e.g. penjualan tanah kepada kedutaan besar) Financial Account/Transaksi Keuangan Direct investment/Investasi langsung (e.g. FDI) Portfolio investment/Jual-beli surat berharga (e.g. Equity shares, Marketable debt) Other investments (e.g. Loans, Derivatives) 21 External Sector Official International Reserves/Change in Reserve Assets Changes, hence flows Include: Foreign exchange assets; Gold; Special Drawing Rights and IMF Reserves 22 External Sector Key Concepts 23 External Sector Balance of Payments financing constraint 24 External Sector Komponen dalam BOP (BPM6) Current Account Balance (CAB, surplus +, deficit -) Exports of Goods and Services Imports of Goods and Services Primary Income (net) Basic Balance Secondary Income (net) Official Private Capital Account (surplus +, deficit -) Financial Account Direct Investment Portfolio Investments Financial Derivatives a.o. Other Investments Net Errors and Omissions 25  External Sector Format Penyajian Neraca Pembayaran Penyajian Analitis Tanda I. Transaksi Berjalan (Current Account) A. Barang (Goods), dirinci Migas dan Nonmigas ekspor (+), impor (-) B. Jasa (Services) ekspor (+), impor (-) C. Pendapatan Primer (Primary Income) D. Pendapatan Sekunder (Secondary Income) penerimaan (+), pembayaran (-) penerimaan (+), pembayaran (-) II. Transaksi Modal (Capital Account) penerimaan (+), pembayaran (-) III. Transaksi Finansial (Financial Account) A. Transaksi Modal (Capital Account) B. Transaksi Finansial (Financial Account) 1. Investasi Langsung (Direct Investment); ke luar negeri (-), di Indonesia (+) 2. Investasi Portofolio (Portfolio Investment), dirinci public sector dan aset (-), kewajiban (+) private sector 3. Derivatif Finansial (Financial Derivative) 4. Investasi Lainnya (Other Investment), dirinci public sector dan private sector aset (-), kewajiban (+) IV. Total (I + II + III) surplus (+), defisit (-) V. Selisih Perhitungan Bersih (Net Errors & Omission) VI. Neraca Keseluruhan (Overall Balance, III + IV+V) surplus (+), defisit (-) Cadangan Devisa & yg terkait (Reserves & Related Items) penambahan (-), pengurangan (+) 26 External Sector Pencatatan Transaksi Neraca Pembayaran Untuk seluruh transaksi yang terletak di atas Neraca Keseluruhan (Overall Balance) ✔ Angka positif 🡪 inflows (aliran dana dari penduduk asing ke penduduk Indonesia) ✔ Angka negatif 🡪 outflows (aliran dana dari penduduk Indonesia ke penduduk asing) Untuk seluruh transaksi yang terletak di bawah neraca keseluruhan ✔ Angka positif 🡪 berkurangnya cadangan devisa ✔ Angka negatif 🡪 bertambahnya cadangan devisa 27 External Sector: S-I Perspective and Adjustment External Sector Pencatatan Transaksi Neraca Pembayaran Untuk seluruh transaksi yang terletak di atas Neraca Keseluruhan (Overall Balance) ✔ Angka positif 🡪 inflows (aliran dana dari penduduk asing ke penduduk Indonesia) ✔ Angka negatif 🡪 outflows (aliran dana dari penduduk Indonesia ke penduduk asing) Untuk seluruh transaksi yang terletak di bawah neraca keseluruhan ✔ Angka positif 🡪 berkurangnya cadangan devisa ✔ Angka negatif 🡪 bertambahnya cadangan devisa 29 External Sector Balance: Saving-Investment Perspective Current Account Balance = Saving – Investment Gap GDP Keterangan: = C+I+X–M GDP = Gross Domestic Product GNDP = Gross National Disposable GNDY = GDP + BPI + BSI Income CAB = Current account balance GNDY = C + I + (X – M + BPI + BSI) X = Exports M = Imports GNDY – C – I = (X – M + BPI + BSI) BPI = Balance of Primary Income BPS = Balance of Secondary Income (C + S) – (C + = (X – M + BPI + BSI) S = Domestic saving I) I = Domestic investment p = private; g = government S–I = (X – M + BPI + BSI) S–I = CAB S–I 30 External Sector Saving-Investment Gap Consequence S–I >0 0 0