Mr. Smith, Assistant Director in charge of the Balance of Payments Division, Research and Statistics Department, is a graduate of Amherst College and did further work at Harvard Graduate School. Before coming to the Fund, he was with the U.S. Government, specializing in balance of payments problems.
The Bernstein Report, for example, concludes (on p. 1) that U.S. balance of payments statistics “are about as good as other U.S. economic statistics collected by similar methods” ([U.S.] Review Committee for Balance of Payments Statistics to the Bureau of the Budget, The Balance of Payments Statistics of the United States, A Review and Appraisal (Washington, 1965), hereinafter cited as the Bernstein Report). Edward M. Bernstein was the Chairman of the Review Committee.
By the same token, only one party to a transaction—the resident—is usually accessible to the national data compilers, a circumstance which limits the choice of methods for data collection, compared with the more usual situation in which both transactors are domestic parties.
The qualifications that should be attached to this statement, omitted here, may be found in the pamphlet by Poul Høst-Madsen, Balance of Payments: Its Meaning and Uses, International Monetary Fund, Pamphlet Series, No. 9 (Washington, 1967).
International Monetary Fund, Balance of Payments Manual, 3rd ed. (Washington, 1961), hereinafter cited as the Fund’s Manual.
This convention is common to the Fund’s Manual and to the United Nations (UN) and Organization for Economic Development (OECD) systems of national accounts.
The percentages in this paragraph are based on the world trade figures given in the Direction of Trade, published by the Fund and the International Bank for Reconstruction and Development.
The Fund’s Manual, pars. 45 and 46.
For an aggregation of the balance of payments statistics on private capital, together with a discussion of the technical problems, see Marcus Diamond, “Trends in the Flow of International Private Capital, 1957-65,” Staff Papers, Vol. XIV (1967), pp. 1-42.
This grouping also was in part selected so that the figures would be useful as basic data for purposes other than that of appraising their reliability.
Through 1964, other Soviet countries and Mainland China were not known to be involved in gold transactions.
The alternative derivation of the balance of payments entry for nonmonetary gold, as the difference between production and consumption (including hoarding), is also shown in Table 2. This derivation is entirely a pro forma one, however, since independent estimates of consumption are not available.
Strictly speaking, some Fund charges are received in gold and thus some gold transactions have their counterpart in the services account. The net effect, however, is as described here, as may be seen from Table 3.
Some countries base their merchandise item in the balance of payments on the exchange record rather than on the trade returns. The foregoing line of reasoning would not necessarily apply to these countries, and the illustrative figures that follow may thus be an overstatement of the case. However, by far the largest part of the merchandise trade recorded in the balance of payments is based on trade returns.
Op. cit., p. 43.
This statement does not contradict footnote 2, which refers to the existence of a single resident transactor; most transactions nonetheless involve two flows, both of which may often be subject to measurement from the resident end.
United Nations, Department of Social and Economic Affairs, International Flow of Long-Term Capital and Official Donations, 1961-1965, E/4170, UN Publication Sales No.: 66. II.D.3 (New York, 1966), p. 37.
The Bernstein Report (p. 53) cites instances where U.S. exports under grants are recorded in the U.S. balance of payments at values that are as much as 40 or 50 per cent above their probable export market value.
When the statistics underlying this paper were being compiled, it seemed logical to keep all official reserve holdings (rather than just monetary gold) and the corresponding liabilities separate from other kinds of capital. The discrepancy between reported official foreign exchange assets and their identifiable liability counterparts, however, was found to be very large and variable. It would seem likely that the amounts of officially held foreign assets of all types and of liabilities to foreign official holders could be established with a fair degree of accuracy by balance of payments compilers, and that changes in these amounts would be entered in the balance of payments. It is not so certain, however, that the assets would all be consistently divided between “reserves” or “official monetary movements” and other types of capital, or that, for the liabilities, the sector of the foreign claimant could be correctly identified by the debtor (let alone whether the creditor would consider a particular claim as “reserves”). If the apparent discrepancy in the statistics between reserve assets and the corresponding liabilities is in fact mainly a problem of identification, the difficulty disappears automatically when a global summary is made, since the transactions will cancel out even though they cannot be separately identified. On the other hand, if amounts for “reserves” are deliberately eliminated from the statements of the creditors and debtors, and these amounts are not symmetrical, the differences will appear to be attributable to nonreserve-type capital. For purposes of this paper, it was felt that a better evaluation of asymmetries in the recording of nonreserve-type capital could be made from statistics including official foreign exchange reserves than from figures from which such reserve movements had been only partly eliminated.
Switzerland, which is not a Fund member, nonetheless reports such information as it has available.
The breakdown was not reported by Spain, Switzerland, and Turkey. The largest part of the merchandise trade of these countries, as shown in the trade statistics, was with other OECD members, and it has seemed safe to assume (when no other information was available) that other transactions, including those on capital account, were also mainly with those countries. In any case, the total transactions of Spain, Switzerland, and Turkey are small compared with those of the aggregate for other OECD members, so that the error arising from this allocation procedure could hardly affect the result significantly.
This statement is directed to the capital item but is also true of all other items (except net errors and omissions).