## _wp1588

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---

### III. I. INTRODUCTION — context and scope
- Collapse of the Mexican peso in December 1994 described as the “first financial crisis of the 21st century” and led to establishment of IMF data dissemination standards.
- Historical parallels:
  - Post–Great Depression (1930s) produced a quantum leap in economic statistics.
  - Late 1940s/early 1950s produced the first comprehensive System of National Accounts and the first Balance of Payments Manual.
  - IMF first published International Financial Statistics in 1948 and the Balance of Payments Yearbook in 1949.
- Thesis:
  - Over the past 20 years there has been a “revolution” in availability, standardization and range of economic and financial statistics, driven largely by capital flow liberalization and global financial integration.
  - Developments have been gradual and often crisis-driven; paper focuses on statistics related to capital flows and financial linkages.
- Institutional context:
  - Contributions from many international organizations, notably members of the Inter-Agency Group (IAG) on Economic and Financial Statistics.

### III. II. BACKGROUND — evolution of statistical needs
- Core observation:
  - Economic and financial statistics evolve with market conditions and policy focus; they are produced to inform policy and the public.
- Historical emphasis:
  - Post-war focus on transactions (GDP growth, current account, government deficit) within SNA framework.
- Structural changes since 1970s:
  - Shift to floating exchange rates in the 1970s.
  - 1980s trend toward capital flow liberalization: domestic credit restrictions lifted; exchange controls relaxed; greater competition in financial services.
  - Liberalization increased benefits and risks, raising focus on financial stability as capital flows rose.
- Character of recent advances:
  - Gradual, pervasive; many advances emerged from crisis responses.

### III. III. KEY LANDMARKS — crises, reports, and statistical responses

- A. Cross Report (1986)
  - Context:
    - Early 1980s easing of exchange controls led to sharp increases in cross-border capital flows.
    - Study Group under Sam Cross (Federal Reserve Bank of New York) to assess international banking innovations.
  - Findings/recommendations:
    - Need fuller information on banks' involvement in securities markets.
    - Need information from outside the banking sector on outstanding bond indebtedness and short-term securities.
    - Need information on banks’ off-balance-sheet business.
  - Outcomes:
    - BIS strengthened international banking and securities statistics databases; datasets remain vital for monitoring international banking and securities markets.

- B. Godeaux Report (1992)
  - Context:
    - IMF Executive Board concerned about increasing global balance of payments imbalances; working party under Baron Jean Godeaux from November 1989.
  - Findings:
    - Sharp increase in capital flows during the 1980s outpaced goods, services, and income transactions.
    - Transactions grew in complexity; net errors and omissions became very large.
    - At global level, rise in errors and omissions implied the system was in a “state of crisis.”
  - Recommendations and follow-up:
    - 12 specific recommendations including adoption of IMF’s BPM5, a coordinated benchmark survey of international assets and liabilities, and a standing Committee of balance of payments compilers.
    - IMF Executive Board accepted all recommendations.
    - Progress: wide adoption of BPM5 and BPM6; establishment of coordinated portfolio and direct investment surveys; IMF Committee on Balance of Payments Statistics.
  - Note on positions data:
    - In 1992 few countries reported IIP data to the Fund; by 1998 the number was still only in the “low 30s.” A late-1990s crisis spurred a sharp rise thereafter.

- C. Mexican Crisis (1994/5)
  - Context:
    - International capital flows central as investors reassessed exposures; weak external position worsened by unfavorable developments.
    - Lack of reliable data recognized as a contributing cause.
  - Policy/statistical responses:
    - April 1995: IMF Interim Committee emphasized timely publication of comprehensive data and requested proposals for data provision standards.
    - IMF Staff developed the Special Data Dissemination Standard (SDDS) and the General Data Dissemination System (GDDS).
    - SDDS established in 1996; GDDS in 1997.
  - Key features of SDDS:
    - Philosophy: timely publication of economic data to enable markets to work more efficiently.
    - Introduced Advance Release Calendar (ARC).
    - Identified indicators covering comprehensive frameworks (GDP, balance of payments) and leading indicators (industrial production, external trade).
    - Specifies timeliness and periodicity requirements.
    - Target group: countries accessing international capital markets.
    - Initially required metadata on a specified set of data across four domains: real sector, financial sector, government sector, and external sector.
    - National Summary Data Page (NSDP) established for countries to disseminate data themselves.
    - Subscribers later required to explain deviations from international methodological standards.
  - Outcomes and incentives:
    - Countries voluntarily committed to international dissemination standards with penalties for nonobservance.
    - Evidence indicates SDDS subscription lowered borrowing costs and possibly reduced contagion among emerging market economies.
    - GDDS focused on statistical development; participants provide plans for improvement and develop more slowly without dissemination incentives.
    - Virtually every IMF member is now a subscriber/participant in the SDDS or GDDS.

- D. Asian Crisis (1997/8)
  - Context:
    - Late 1997/early 1998 several Asian economies hit by crisis after large private capital inflows and rapid domestic credit expansion; pegged currencies to an appreciating U.S. dollar worsened vulnerabilities.
    - Depreciation, insolvency, capital outflows, and rapid contagion followed.
  - Data deficiencies and responses:
    - Focus shifted to financial sector vulnerabilities and external debt build-up.
    - Financial Stability Forum (FSF), now Financial Stability Board (FSB), created to coordinate regulatory work.
    - Concern over adequacy/transparency of reserve and reserve-related activity data (forward sales masked reserve pressures).
  - Statistical actions:
    - Development of the Reserve Template (RT) by IMF staff and a BIS Committee on Global Financial Systems working group; RT added as a prescribed data category to the SDDS in 1999.
    - RT characteristics:
      - Unusual statistical product; does not follow standard statistical approaches except in measuring reserve assets.
      - Provides comprehensive picture of reserve and reserve-related activities, discouraging unreported transactions.
      - Only one minor coverage expansion since introduction in 1999.
      - RT remains the hardest SDDS data category for many authorities due to sensitivity and stringent reporting requirements.
    - External debt:
      - High and short-term external debt identified as a contributing factor.
      - Executive Board added an external debt data category to the SDDS and GDDS; for SDDS subscribers the Board specified sector, instrument, and maturity coverage.
      - IMF staff and international agencies developed External Debt Statistics: Guide for Compilers and Users.
  - Stock vs. flow emphasis:
    - Reserves and external debt datasets added to SDDS were stock statistics.
    - Executive Board upgraded annual IIP data from “encouraged” to “prescribed” in the SDDS.
    - Since 1999, additions to SDDS and SDDS Plus have overwhelmingly been stock datasets.
  - Derivatives:
    - RT incorporated financial derivatives into reserve analysis.
    - 1993 SNA introduced methodology for exchange-traded derivatives; later updated for OTC derivatives.
    - BIS developed related statistics in response to derivatives growth.

### Global Crisis (2008) and institutional response
- The 2007/2008 global crisis highlighted gaps in available information, notably on financial interconnections.
- April 2009: IMF and FSB were asked to explore information gaps and provide proposals for strengthening data collection and report back to the G-20 Finance Ministers and Central Bank Governors (FMCBG); this call was endorsed by the IMF’s IMFC.
- IMF and FSB consultation produced 20 recommendations endorsed by the G-20 FMCBG to:
  - support identification of the build-up of risk in the financial sector;
  - support analysis of cross-border interconnections;
  - identify vulnerabilities in the domestic economy;
  - promote improved communication of data.
- Coordination mechanism:
  - IAG members: BIS, ECB, Eurostat, IMF (chair), OECD, World Bank and UN to cooperate on economic and financial statistics.

### Data Gaps Initiative (DGI) and follow-up
- DGI emphasis:
  - Develop and disseminate data supporting analysis of national balance sheets, cross-border interconnections, and financial sector vulnerabilities, and areas such as distributional data and real estate prices.
- Progress and follow-up:
  - Significant progress in implementing DGI recommendations.
  - G-20 FMCBG asked IMF and FSB in September 2014 to propose a second phase of the DGI by the second half of 2015.
  - Many DGI-covered datasets informed the SDDS Plus data categories.

### Financial Soundness Indicators (FSIs)
- After the Asian crisis, core and encouraged FSIs were endorsed by the IMF Executive Board in June 2001.
- Core indicators grouped under: “capital adequacy,” “asset quality,” “earnings and profitability,” “liquidity,” and “sensitivity to market risk.”
- Subsequent developments:
  - FSI Compilation Guide and pilot coordinated compilation exercise began after list agreed.
  - Regular reporting by member countries started in 2009.
  - Presently around 100 countries provide FSI data to the IMF for re-dissemination with a subset published every sixth months in the IMF’s Global Financial Stability Report (GFSR).
  - A set of FSIs are encouraged items in the SDDS and prescribed items in the SDDS Plus.
  - The FSI list was updated following the global crisis.

### Evolution of data dissemination standards: SDDS and SDDS Plus
- SDDS Plus endorsed to guide provision of economic and financial data supporting domestic and international financial stability; SDDS Plus data categories are grounded in DGI datasets.
- SDDS Plus data categories include: sectoral accounts, general government gross debt, real estate prices, securities statistics, FSIs, and coordinated exercises such as CPIS and CDIS.
- To become SDDS Plus adherent, an economy must be a subscriber to the SDDS in full observance of all SDDS requirements.
- November 2014: first countries committed to adhere to SDDS Plus; by February 2015 eight countries (adherents) met the requirements of the SDDS Plus.
- SDDS Plus primarily intended for economies with systemically important financial centers; IMF Executive Board designated 29 economies to be subject to a mandatory FSAP at least every five years.

### Key trends of development in economic and financial statistics

- Transparency and Standardization
  - Strong pressure for greater transparency and standardization driven by policy makers, financial markets, and private sector users.
  - Virtually every IMF member country is either an adherent to the SDDS Plus, a subscriber to the SDDS, or a participant in the GDDS.
  - Trend toward “free data”: releasing non-confidential data to the public free of charge is more common.
  - Increasing demand for more frequent and timely data; annual datasets increasingly requested quarterly (examples: IIP data, sectoral accounts, general government debt, FSIs).
  - Trade-off between timeliness and data quality acknowledged.

- Proliferation of standards and manuals (selected IMF-associated publications and dates)
  - Reserve Template Guidelines (1999, updated 2013)
  - Monetary and Financial Statistics Manual (2000, updated 2015)
  - Manual on Statistics of International Trade in Services (2002, updated in 2010)
  - External Debt Guide (2003, updated 2013)
  - Producer Price Index Manual (2004)
  - Consumer Price Index Manual (2004)
  - Export and Import Price Index Manual (2009)
  - FSI Guide (2006)
  - International Transactions in Remittances Guide (2009)
  - Public Sector Debt Guide (2011)
  - Residential Real Estate Price Handbook (2013)
  - Handbook on Security Statistics (2015)
  - Fundamental revision of the Government Finance Statistics Manual (GFSM) (2001 and 2014) from the 1986 version.

- Increased emphasis on position (stock) data
  - Liberalization of capital flows shifted attention from flows to stocks because vulnerabilities build up in positions.
  - IIP evolution:
    - From relatively few reporters in late 1990s to quarterly IIP prescribed in the SDDS.
    - Over 140 countries compile IIP, of which around 90 report quarterly.
  - Sectoral balance sheet analysis gaining prominence in IMF surveillance; Triennial Surveillance Review 2014 noted usefulness of national balance sheet analyses.
  - Greater demand for maturity breakdowns on a remaining maturity basis and for currency composition details.

- Data on financial interconnections
  - Growing interest in bilateral financial exposures and gross exposures as well as net positions.
  - Development and strengthening of cross-border statistics: CPIS, CDIS, BIS international banking statistics (IBS) locational and consolidated, new GSIB interconnections data.
  - Conceptual move toward a global “flow of funds”: linking cross-border financial stock data with sectoral accounts balance sheet data to map interconnections.
  - Recognition of global architecture elements: (i) global core; (ii) clusters; (iii) gatekeepers.

- Focus on the financial sector and intersection of micro and macro data
  - Increased attention to nonbank (shadow banking) sector and global systemic institutions (G-SIFIs).
  - FSI development required cooperation between statisticians, accountants, and supervisors due to different data concepts.
  - DGI datasets support intersectional analysis across macro-prudential, macro-economic, and micro-prudential domains.

### Observations on integration and analytic frameworks
- Integration of macroeconomic conceptual standards (SNA, BPM, GFSM) has become the norm.
- Balance Sheet Approach (BSA) exemplifies integrated analysis using monetary and financial statistics with external and government data to map financial interconnections.
- Consolidated (institutional) vs. residence-based data:
  - BIS IBS consolidated statistics and GSIB data compiled on a consolidated basis.
  - Interest in reconciling residence and consolidated perspectives is increasing.

### Chapter 1, Rising Market Liquidity Risks — data initiatives and demand for granular information
- Current data initiatives focus on better data on securities markets (long term funding), repurchase agreements and securities lending (short-term funding) and derivatives markets.
- Drivers of demand:
  - Growing financial stability policy interests (market liquidity (repos) and leverage (derivatives)).
  - Macro and financial policy interests (provision of long-term capital).
- Macro analysts seek more granular (micro) information to assess vulnerabilities and risks where problems in one sector can translate to another.
- Policy interest in concentration and distribution measures and tail risks is increasing (example: market disruptions in the UK from the failure of Northern Rock in 2007).
- New data collections:
  - IMF exercise to collect concentration and distribution measures for a selected group of FSIs.
- Confidentiality concerns arise as micro data demand increases.

### Independence of statistical agencies and data credibility
- Endorsement in 1994 of the Fundamental Principles of Official Statistics; United Nations General Assembly endorsed the Principles on January 23, 2014.
- Emphasis on independence, autonomy and impartiality as prerequisites for credibility.
- IMF contributions:
  - Data Quality Assessment Framework (DQAF) for use in Data ROSC.
  - DQAF first section focuses on institutional arrangements: legal and institutional environment, resources and relevance.
  - IMF Statistics Department conducted voluntary Data ROSC program with country consent.
- Consequences and national reforms:
  - Increasing legislative backing for operational independence of statistical agencies.
  - Examples: Mexico (INEGI given technical and management autonomy in 2008) and the UK (creation of an independent UK Statistics Authority).
- Market sensitivity:
  - Increased investor interest raises cost to governments of perceived data manipulation.
  - Assurance of confidentiality for individual data reinforced by statistical independence.

### Trends in dissemination, integration, reporting bases, collaboration and data sources
- Dissemination:
  - Continued pressure for transparency and improved dialogue with users.
  - IMF initiatives: "free data" initiative and strengthening the GDDS.
- Integration:
  - Trend toward reconciling transactions and stock positions and measuring revaluations and other changes in volume to better capture net worth impacts (referenced GFSM 2014 (Figure 4.1)).
  - Integrating micro and macro data subject to confidentiality constraints (examples: OECD framework; IMF work on concentration and distribution measures for FSIs).
- Closing gap between residence and consolidated bases:
  - Residency data central to macro policy but corporations operate across jurisdictions.
  - BIS work mapping residence to consolidated basis for banking groups by nationality of subsidiaries and branches; interest in two-way mapping likely to grow.
- Collaboration and private sector roles:
  - Cooperation across agencies encouraged to avoid duplicate collections and reconcile sectoral accounts.
  - IAG exploring single-reporting models and shared access.
  - Surveys supplemented by administrative data remain key; big data offers potential but faces coverage and conceptual challenges.
  - Legal Entity Identifier initiative could support from-whom-to-whom data; ECB prototype security-by-security database exists.
  - Private sector data providers supply frequently updated complementary statistics; relationships may evolve among national, international, and private actors.
- Human resources:
  - Statisticians need broader skills; increased dialogue with users required.
  - Users must understand complex datasets; collecting unused data is inefficient.

### Conclusions and outlook
- Past two decades represent a revolution in economic and financial statistics driven largely by capital flow liberalization.
- Implemented responses:
  - Strengthening infrastructure of external statistics.
  - Greater transparency led by data standards.
  - Standardization supported by new methodologies.
  - New datasets for financial interconnections (CPIS, CDIS) and financial sector risks (FSIs, G-SIBs).
  - Strengthened governance via greater independence of statistical agencies and transparency.
- Remaining challenges:
  - Full impact of liberalization on statistics has not yet worked through the system.
  - Analytical framework for financial stability remains a work in progress; until analytical needs are comprehensively articulated, data needs cannot be settled.
  - Statisticians continue to digest and understand changes; this paper places developments in historical context and identifies trends to build upon.

*Source: _wp1588 (IMF PDF).*

### References .............................................................................................................

### _wp1588 - References .............................................................................................................

### References
- References ................................................................................................................................29

### Charts
- 1. Framework of the National Account......................................................................................6
- 2. Global External Assets and Liabilities (ratio of world GDP) ................................................7

*Source: _wp1588 - References (PDF)*

### 3. Sectoral Linkages ...................................................................................................

### 3. Sectoral Linkages

### III. I. INTRODUCTION — context and scope
- The collapse of the Mexican peso in December 1994 was described as the “first financial crisis of the 21st century” and led to the establishment of the IMF’s data dissemination standards.
- Historical parallels:
  - Post–Great Depression (1930s) spurred a quantum leap in economic statistics.
  - Late 1940s/early 1950s saw the first comprehensive System of National Accounts and the first Balance of Payments Manual; the IMF and other international organizations promoted regular compilation and dissemination.
  - The IMF first published International Financial Statistics in 1948 and the Balance of Payments Yearbook in 1949.
- Thesis of the paper:
  - Over the past 20 years there has been a “revolution” in the availability, standardization and range of economic and financial statistics driven largely by capital flow liberalization and growing global financial integration.
  - The process has been more gradual than the post-war advances; many developments arose in response to crises rather than from a single overarching analytical framework.
  - The paper focuses on statistics related to capital flows and financial linkages; outsourcing and trade in goods and services are acknowledged but treated as a separate related story focused on output measurement.
- Institutional context:
  - Many international organizations have contributed, notably members of the Inter-Agency Group (IAG) on Economic and Financial Statistics.

### III. II. BACKGROUND — evolution of statistical needs
- Core observation:
  - Economic and financial statistics evolve with market conditions and policy focus because they are produced to inform policy and the public.
- Historical emphasis:
  - Post-war focus concentrated on transactions (growth of GDP, current account balance, government deficit) and demand/supply, with the SNA (System of National Accounts) as the overarching framework.
- Structural changes since 1970s:
  - Shift from fixed-rate to floating-rate exchange rate regimes in the 1970s.
  - 1980s trend toward capital flow liberalization: domestic credit restrictions lifted, exchange controls relaxed, greater competition in financial services, and wider financing options.
  - Liberalization generated benefits but also new risks and vulnerabilities domestically and across borders, increasing focus on financial stability as capital flows rose.
- Character of recent statistical advances:
  - More gradual and pervasive compared with the rapid post-war changes.
  - Many advances emerged from crisis responses; the analytical framework evolved incrementally.

### III. III. KEY LANDMARKS — crises, reports, and statistical responses

- A. Cross Report (1986)
  - Context:
    - Early 1980s easing of exchange controls led to sharp increases in cross-border capital flows.
    - A Group of Ten–requested Study Group under Sam Cross (Federal Reserve Bank of New York) aimed to develop a framework to consider implications of innovations in the international banking system.
  - Findings/recommendations:
    - Need for fuller, more detailed information on banks' involvement in securities markets.
    - Need for information from outside the banking sector on outstanding bond indebtedness and short-term securities.
    - Need for information on banks’ off-balance-sheet business.
  - Response and outcomes:
    - BIS strengthened international banking and securities statistics databases; these datasets were further reinforced over the years and remain vital for monitoring international banking and securities markets.

- B. Godeaux Report (1992)
  - Context:
    - IMF Executive Board concerned about increasing global balance of payments imbalances; working party under Baron Jean Godeaux set up in November 1989.
    - Mandate: evaluate statistical practices for measuring international capital flows, investigate principal sources of discrepancy, and recommend actions to minimize discrepancies.
  - Findings:
    - Sharp increase in capital flows during the 1980s, outpacing growth of goods, services, and income transactions.
    - Transactions grew in complexity; net errors and omissions became so large that true capital and current account balances were difficult to ascertain.
    - At the global level, rise in errors and omissions implied the system was in a “state of crisis.”
  - Recommendations and follow-up:
    - 12 specific recommendations, including adoption of IMF’s Balance of Payments Manual (BPM5), a coordinated benchmark survey of international assets and liabilities, and creation of a small standing Committee of balance of payments compilers to oversee implementation.
    - IMF Executive Board accepted all recommendations.
    - Progress since: wide adoption of BPM5 and BPM6, establishment of coordinated portfolio and direct investment surveys, and the IMF Committee on Balance of Payments Statistics as an institutional bulwark.
  - Note on positions data:
    - In 1992 few countries reported International Investment Position (IIP) data to the Fund; by 1998 the number was still only in the “low 30s.” A late-1990s crisis spurred a sharp rise thereafter.

- C. Mexican Crisis (1994/5)
  - Context:
    - International capital flows central as investors reassessed exposures; weak external position exacerbated by a series of unfavorable developments.
    - Immediate recognition that lack of reliable data had been a contributing cause.
  - Policy/statistical responses:
    - April 1995: IMF Interim Committee emphasized timely publication by members of comprehensive data and requested proposals for data provision standards.
    - IMF Staff developed the Special Data Dissemination Standard (SDDS) and the General Data Dissemination System (GDDS).
    - SDDS established in 1996; GDDS in 1997.
  - Key features of SDDS:
    - Philosophy: timely publication of economic data to enable markets to work more efficiently.
    - Introduced Advance Release Calendar (ARC).
    - Identified a list of indicators to be disseminated covering comprehensive frameworks (GDP, balance of payments) and leading indicators (industrial production, external trade).
    - Specifies timeliness and periodicity requirements.
    - Target group: countries accessing international capital markets.
    - Initially required metadata on a specified set of data across four domains: real sector, financial sector, government sector, and external sector.
    - National Summary Data Page (NSDP) established for countries to disseminate data themselves.
    - Subscribers later required to explain deviations from international methodological standards.
  - Outcomes and incentives:
    - Countries voluntarily committed to meet international dissemination standards with penalties for nonobservance.
    - Evidence indicates SDDS subscription lowered borrowing costs and possibly reduced contagion among emerging market economies.
    - GDDS focused on statistical development for countries; participants provide plans for improvement. Without incentives to disseminate, statistical systems develop more slowly; enhancements to encourage dissemination have been made.
    - Virtually every IMF member is now a subscriber/participant in the SDDS or GDDS.

- D. Asian Crisis (1997/8)
  - Context:
    - Late 1997/early 1998: several Asian economies severely hit by crisis following large private capital inflows and rapid domestic credit expansion; pegged currencies to an appreciating U.S. dollar worsened vulnerabilities.
    - Change in market sentiment led to currency depreciation, insolvency, and capital outflows; contagion spread rapidly.
  - Data deficiencies and responses:
    - Lack of data contributed, with emphasis shifting to financial sector vulnerabilities and external debt build-up.
    - Financial Stability Forum (FSF), now Financial Stability Board (FSB), was created to coordinate regulatory work in the financial sector.
    - Concern about adequacy and transparency of reserve and reserve-related activity data: forward sales of foreign currency contracts (e.g., by Bank of Thailand) had masked reserve pressures.
  - Statistical actions:
    - Development of the Reserve Template (RT) by IMF staff and a BIS Committee on Global Financial Systems working group; RT added as a prescribed data category to the SDDS in 1999.
    - RT characteristics:
      - Unusual statistical product; does not follow standard statistical approaches except in measuring reserve assets.
      - Provides comprehensive picture of reserve and reserve-related activities, making it difficult for reserve managers to undertake unreported transactions.
      - Only one minor coverage expansion since introduction in 1999.
      - RT remains the hardest SDDS data category for many authorities to accept due to sensitivity and stringent reporting requirements.
    - External debt:
      - High and short-term external debt identified as a contributing factor; international methodological standards were lacking and data were inconsistent across countries.
      - Executive Board added an external debt data category to the SDDS and GDDS; for SDDS subscribers the Board specified sector, instrument, and maturity coverage for external debt dissemination.
      - IMF staff and international agencies developed External Debt Statistics: Guide for Compilers and Users to help implement the Board decision and encourage consistent external debt data compilation and dissemination.
  - Stock vs. flow emphasis:
    - Reserves and external debt datasets added to SDDS were stock statistics.
    - Executive Board upgraded annual IIP data from “encouraged” to “prescribed” in the SDDS.
    - Since 1999, additions to SDDS and SDDS Plus have overwhelmingly been stock datasets, reflecting recognition that vulnerabilities became visible in stock positions as financing constraints lifted with capital flow liberalization.
  - Derivatives:
    - RT incorporated financial derivatives into reserve analysis.
    - 1993 SNA introduced methodology for exchange-traded derivatives; later updated for over-the-counter (OTC) derivatives.
    - BIS developed related statistics in response to derivatives growth.

*Source: _wp1588 - 3. Sectoral Linkages (IMF PDF).*

### conclusions of this work were reflected in the SNA; see

### _wp1588 - conclusions of this work were reflected in the SNA; see

### Global Crisis (2008) and institutional response
- The 2007/2008 global crisis highlighted gaps in available information, notably on financial interconnections.
- April 2009: IMF and FSB were asked to explore information gaps and provide proposals for strengthening data collection and report back to the G-20 Finance Ministers and Central Bank Governors (FMCBG); this call was endorsed by the IMF’s IMFC.
- IMF and FSB consultation produced 20 recommendations endorsed by the G-20 FMCBG to:
  - support identification of the build-up of risk in the financial sector;
  - support analysis of cross-border interconnections;
  - identify vulnerabilities in the domestic economy;
  - promote improved communication of data.
- Coordination mechanism: the IAG (members: BIS, ECB, Eurostat, IMF (chair), OECD, World Bank and UN) to cooperate on economic and financial statistics.

### Data Gaps Initiative (DGI) and follow-up
- DGI emphasis: develop and disseminate data supporting analysis of national balance sheets, cross-border interconnections, and financial sector vulnerabilities, and areas such as distributional data and real estate prices.
- Significant progress reported in implementing DGI recommendations; G-20 FMCBG asked IMF and FSB in September 2014 to propose a second phase of the DGI by the second half of 2015.
- Many DGI-covered datasets informed the SDDS Plus data categories.

### Financial Soundness Indicators (FSIs)
- After the Asian crisis, core and encouraged FSIs were endorsed by the IMF Executive Board in June 2001.
- Core indicators grouped under: “capital adequacy,” “asset quality,” “earnings and profitability,” “liquidity,” and “sensitivity to market risk.”
- Subsequent developments:
  - FSI Compilation Guide and pilot coordinated compilation exercise began after the list was agreed.
  - Regular reporting by member countries started in 2009.
  - Presently around 100 countries provide FSI data to the IMF for re-dissemination with a subset published every sixth months in the IMF’s Global Financial Stability Report (GFSR).
  - A set of FSIs are encouraged items in the SDDS and prescribed items in the SDDS Plus.
  - The FSI list was updated following the global crisis.

### Evolution of data dissemination standards: SDDS and SDDS Plus
- Executive Board endorsed SDDS Plus to guide provision of economic and financial data supporting domestic and international financial stability; SDDS Plus data categories are grounded in datasets covered by the DGI.
- SDDS Plus data categories include: sectoral accounts, general government gross debt, real estate prices, securities statistics, FSIs, and coordinated exercises such as CPIS and CDIS.
- To become an SDDS Plus adherent, an economy must be a subscriber to the SDDS in full observance of all SDDS requirements.
- November 2014: first countries committed to adhere to SDDS Plus; by February 2015 eight countries (adherents) met the requirements of the SDDS Plus.
- SDDS Plus is primarily intended for economies with systemically important financial centers; IMF Executive Board designated 29 economies to be subject to a mandatory FSAP at least every five years.

### Key trends of development in economic and financial statistics
- Transparency and Standardization
  - Strong pressure for greater transparency and standardization driven by policy makers, financial markets, and private sector users.
  - Widespread voluntary subscription: virtually every IMF member country is either an adherent to the SDDS Plus, a subscriber to the SDDS, or a participant in the GDDS.
  - Trend toward “free data”: releasing non-confidential data to the public free of charge has become more common.
  - Increasing demand for more frequent and timely data; annual datasets increasingly requested quarterly (e.g., IIP data, sectoral accounts, general government debt, FSIs).
  - Trade-off acknowledged between timeliness and data quality; more estimated data implies greater scope for revisions.

- Proliferation of standards and manuals (selected IMF-associated publications and dates preserved)
  - Reserve Template Guidelines (1999, updated 2013)
  - Monetary and Financial Statistics Manual (2000, updated 2015)
  - Manual on Statistics of International Trade in Services (2002, updated in 2010)
  - External Debt Guide (2003, updated 2013)
  - Producer Price Index Manual (2004)
  - Consumer Price Index Manual (2004)
  - Export and Import Price Index Manual (2009)
  - FSI Guide (2006)
  - International Transactions in Remittances Guide (2009)
  - Public Sector Debt Guide (2011)
  - Residential Real Estate Price Handbook (2013)
  - Handbook on Security Statistics (2015)
  - Fundamental revision of the Government Finance Statistics Manual (GFSM) (2001 and 2014) from the 1986 version.

- Increased emphasis on position (stock) data
  - Liberalization of capital flows shifted attention from flows to stocks because vulnerabilities build up in positions.
  - IIP evolution: from relatively few reporters in the late 1990s to quarterly IIP prescribed in the SDDS; over 140 countries compile IIP, of which around 90 report quarterly.
  - Sectoral balance sheet analysis gaining prominence in IMF surveillance; IMF Executive Board (Triennial Surveillance Review 2014) saw usefulness of national balance sheet analyses in capturing risks from gross as well as net flows.
  - Greater demand for maturity breakdowns on a remaining maturity basis and for currency composition details; SNA barely mentions these characteristics while they were introduced into BPM with BPM6.

- Data on financial interconnections
  - Growing policy interest in bilateral financial exposures and gross exposures as well as net positions.
  - Development and strengthening of cross-border statistics: CPIS, CDIS, BIS international banking statistics (IBS) locational and consolidated, new GSIB interconnections data.
  - Conceptual move toward a global “flow of funds”: linking cross-border financial stock data with sectoral accounts balance sheet data to map domestic and cross-border financial interconnections (referenced framework and Chart 3 in source).
  - Recognition of global architecture elements: (i) global core; (ii) clusters; (iii) gatekeepers.

- Focus on the financial sector and intersection of micro and macro data
  - Post-Asian crisis and post-2008 crisis developments increased attention to the financial sector, including the nonbank (shadow banking) sector and global systemic institutions (G-SIFIs).
  - FSIs development required cooperation between statisticians, accountants, and supervisors because supervisory data often followed commercial accounting concepts and differed from national accounts.
  - DGI datasets support intersectional analysis across macro-prudential, macro-economic, and micro-prudential domains.

### Observations on integration and analytic frameworks
- Integration of macroeconomic conceptual standards has become the norm; manuals and guides are expected to be consistent across domains (SNA, BPM, GFSM, etc.).
- Balance Sheet Approach (BSA) exemplifies integrated analysis using monetary and financial statistics together with external and government data to develop a coherent picture of financial interconnections across sectors.
- Consolidated (institutional) vs. residence-based data: BIS IBS consolidated statistics and GSIB data compiled on a consolidated basis; interest in reconciling residence and consolidated perspectives is increasing.

*Source: _wp1588 - conclusions of this work were reflected in the SNA; see*

### Chapter 1, Rising Market Liquidity Risks.

### _wp1588 - Chapter 1, Rising Market Liquidity Risks

### Data initiatives and demand for granular information
- Current data initiatives focus on obtaining better data on securities markets (long term funding), repurchase agreements and securities lending (short-term funding) and derivatives markets.
- Drivers of demand:
  - Growing financial stability policy interests (e.g., concerns over market liquidity (repos) and leverage (derivatives)).
  - Financial policy and macro-economic policy interests (e.g., provision of long-term capital for productive purposes).
- Macro analysts increasingly seek more granular (micro) information to assess vulnerabilities and risks in a world of capital flow liberalization where problems in one sector can translate to another.
- Policy interest in concentration and distribution measures and tail risks is increasing (example cited: market disruptions in the UK from the failure of Northern Rock in 2007).
- New data collections and exercises:
  - IMF exercise to collect concentration and distribution measures for a selected group of FSIs.
- Confidentiality concerns arise as micro data demand increases: "who can see the micro data?"
- National accounts–based granularity:
  - Growing interest in household sector distributions (income, consumption, wealth) as widening distributions can produce financial vulnerabilities even when aggregate data appear reassuring (global crisis example).

### Independence of statistical agencies and data credibility
- Increased global interest in national statistics has focused attention on the credibility of disseminated data and the statistical agency as guarantor of quality and independence.
- Key developments:
  - Endorsement in 1994 of the Fundamental Principles of Official Statistics by the United Nations Statistical Commission (the United National General Assembly endorsed the Fundamental Principles of Official Statistics on January 23, 2014 during its 68th session is noted).
  - Emphasis on independence, autonomy and impartiality as prerequisites for credibility and high quality.
- IMF contributions:
  - Early 2000s: IMF designed a Data Quality Assessment Framework (DQAF) for use in its Data Report on the Observance of Standards and Codes (ROSC).
  - The first section of the DQAF focuses on institutional arrangements: legal and institutional environment, resources and relevance (meeting users’ needs).
  - IMF Statistics Department undertook a broad program of Data ROSC (a voluntary exercise), publishing reports with the assessed country’s consent.
- Consequences and national reforms:
  - Increasing legislative backing for operational independence of statistical agencies.
  - Examples of strengthened institutional arrangements: Mexico (INEGI given technical and management autonomy in 2008) and the UK (creation of an independent UK Statistics Authority).
- Market sensitivity:
  - Increased investor interest in data raises the cost to governments of perceived data manipulation through political pressure.
  - Assurance of confidentiality for individual data reported by economic agents is reinforced by statistical independence.

### Trends in data dissemination, integration, and reporting bases
- Dissemination of data:
  - Pressure toward greater transparency will continue, including improved dialogue with users.
  - IMF initiatives include the "free data" initiative and strengthening the GDDS to provide incentives for participants to disseminate more data.
- Greater integration of datasets:
  - Globalization increases interest in financial interconnections; trend toward greater standardization and integration likely to continue.
  - Possible directions:
    - Reconciling transactions and stock positions and more accurately measuring revaluations and other changes in volume to provide a more integrated picture of economic and financial developments; focus on impact on net worth of sectors (highlighted in the GFSM 2014 (Figure 4.1)).
    - Integrating micro and macro data to provide more complete analysis, subject to confidentiality constraints (examples: OECD integrated framework on distribution of household income, consumption, and wealth; IMF work on concentration and distribution measures for FSIs).
- Closing gap between residence and consolidated bases of reporting:
  - Residency data remain central to macro-economic policy, but corporations and individuals operate across jurisdictions.
  - Example: Multinational firms borrowing dollars through offshore affiliates can limit the effect of national policy on dollar credit (BIS working paper cited).
  - Data on international debt securities by residence and nationality of issuer can help monitor activity.
  - Banking regulation and some data sets (BIS consolidated banking, international debt securities, GSIB dataset, FSIs) are compiled on a consolidated approach, consolidating branches and subsidiaries across borders with the parent.
  - BIS is developing datasets that map from residence basis to consolidated basis for banking groups by identifying nationality of subsidiaries and branches in foreign economies; interest in two-way mapping likely to grow.

### Collaboration, data sources, and private sector roles
- Close collaboration across national and international agencies:
  - Increased demand and standardization pressures encourage cooperation to avoid duplicate national collections and to reconcile sectoral accounts.
  - Growing interest in bilateral geographical information and use of counterparty "mirror" data (example: BIS international banking statistics).
  - Potential efficiencies: countries reporting once to one international agency which then validates and shares data with others; posting standardized data on a common website for international agencies to access.
  - IAG is working along these lines.
- Improvements in data sources:
  - Surveys supplemented by administrative data remain key for reliable information on economic agents.
  - Big data: potential for more up-to-date information and leading indicators, but challenges include ensuring appropriate sample coverage and adherence to statistical concepts; "Only time will tell what role big data may play."
  - Legal Entity Identifier initiative could capture financial transactions using a common code; if it incorporates characteristics relevant for statistical compilation, it could enable more timely, frequent and reliable data and support from-whom-to-whom data.
  - Prototype: security-by-security databases with unique identifiers and statistical information (ECB has developed such a database).
- Growth of private sector data providers:
  - Private companies supply financial statistics that tend to be more frequently updated and cover areas not in official sources.
  - Currently complementary to official statistics; relationship may evolve to involve three actors: national, international, and private.
- Development of human resources:
  - Statisticians need deeper and broader skills to meet new policy demands and to implement new collections.
  - Increased dialogue between statisticians and users is needed; statisticians may detect trends and vulnerabilities early but must judge how much to draw out when compiling and disseminating data.
  - Users also have an obligation to understand and use complex new datasets; collecting data that are not used is inefficient.

### Conclusions and outlook
- The past two decades represent a revolution in economic and financial statistics driven largely by liberalization of capital flows domestically and cross border.
- Responses implemented:
  - Strengthening infrastructure of external statistics.
  - Greater transparency led by data standards initiative.
  - Greater standardization supported by new methodologies spreading best practice.
  - New datasets to understand financial interconnections (e.g., CPIS and CDIS) and financial sector risks (e.g., FSIs and G-SIBs).
  - Strengthened governance of the statistical function through greater independence of statistical agencies and transparency of national practices.
- Remaining challenges:
  - The full impact of liberalization on statistics has not yet worked through the system.
  - The analytical framework for financial stability remains a work in progress; until analytical needs are comprehensively articulated, data needs cannot be settled.
  - Statisticians are still digesting and understanding the changes; this paper aims to place developments in historical context and identify common trends to build upon.

*Source: _wp1588 - Chapter 1, Rising Market Liquidity Risks.*

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_Source: https://www.imf.org/-/media/websites/imf/imported-full-text-pdf/external/pubs/ft/wp/2015/_wp1588.pdf_