Why do External Statistics Matter? – A Multidimensional Approach in a Context of Macroeconomic Imbalances

João Cadete de Matos, Paula Menezes, Lígia Maria Nunes

Banco de Portugal, Lisboa, Portugal

Abstract: The recent financial crisis highlighted the importance of an early detection and mitigation of macroeconomic vulnerabilities. In this context statistical compilers and analysts were challenged to develop enhanced methodologies and indicators, namely under the scope of external statistics. This paper proposes a multidimensional assessment of the external debt imbalances achieving a comprehensive and consistent approach by analysing not only the decomposition of the current and capital account balances but also how the economy is financed. This is possible through a deep insight of the financial account. Due to the existent interconnections one might analyse the current and capital account and whether a given deficit or surplus is explained by the component of goods and services or by the component of current income generated by the direct or portfolio investment, as an example. Simultaneously it is possible to observe in more detail the type of financial instruments; identifying if the net acquisition or disposal of financial assets is explained by the behaviour of a given institutional sector; detecting risk exposure of investment by country or identifying bilateral asymmetries that might exist with other commercial partners. It is a comprehensive and integrated approach rich of a variety of dimensions.

Keywords: external statistics, balance of payments, imbalances, direct investment, portfolio investment, income.

Pages: 145 – 152 | Full PDF Paper