An introduction to key concepts commonly used in the analysis of the economy by the Research Department

Michael Adams

23 June 2014

EN/ADM/2014/Pres/14

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MFSM/GFS

GFS

MFSM

SNA

BOP

SNA

Introduction

QB March 2011

Visually orientated introduction Economists usually focus on economic growth, stability

and equity Evaluating the state of the economy:

– Economic growth SNA 1993– Full employment (BC)– Balance of payments (BoP) stability BPM5– Price and financial market stability MFSM2000– An equitable distribution of income GFSM2001

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Reason for chart

• Three fold• Cannot analyse economy without taking into account

all four macroeconomic accounts• According to the four manuals• Three accounts accrual basis (SNA, BoP, MFSM)• 1ST January to 31ST December • One account cash-flow (GFS) ? Semi• 1st April to 31ST March • Adjustments between cash and accrual

(challenged)• Economic analysis /inter linkages in the economy

across divisions• Staff training and development

Economic analysis/interlinkages

• Design of the Chart• Colour coded• Segments 1-38• Follow format of the Quarterly Bulletin

• BIG BLOCKS• SNA

• Domestic output• Gross domestic expenditure

• GFS• General government• Public corporations

• All institutions must fit in somewhere in the four macroeconomic accounts

Economic relationships

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Identity relationship:

– GDP = GDP agriculture + GDP mining + GDP manufacturing

………… GDP Gov.Services

– Trade account = X mining + X agriculture + X manufacturing - M

mining – M agriculture – M manufacturing

– Money supply = M1 + M2 +M3– Credit extension = Households + corporates – G -T= Deficit

Behavioural relationship:

– Ct = a + b.Ydt + d.interest ratet+ ɛt

Economic interpretation

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Booklet

• Definitions• Flow of chart• Use for Pre-MPC (discussion)• Various forms being used in the Department (NO1, B03,

C68 and F02)• Balance sheet or income statement• Balance sheet – stock position• Income statement – flow position• Government cash-flow position

Economic chart

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CONCLUSION

No means exhaustive Each division use area to expand Time series structure Overview Reasons for changes Read the Quarterly Bulletin and the economic overview

of the country

Thank you

Michael.adams@resbank.co.za

Tel: +27 12 313 3874

Fax: +27 12 313 4014

QB March 2011