Net Errors and Omissions Account Overview: Analysis of Selected Countries (1980-2018)Suna Şahin
Not many analyses have been conducted on net errors and omissions in publications on Economics which is relevant to the origins of net errors and omissions and their effects on the balance of payments. There is no clarified answer to indicate the degree to which errors and omissions are acceptable. Each country has its characteristics, and it is tough to generalize the reasons behind the balance of payment mismatches. This research intends to study the relationship between selected countries’ (India, Singapore, Malaysia, United States, Uruguay, Philippines) balance of payment accounts ‘net errors and Omissions’ account of macroeconomic variables (GDP, trade volume considered as import and export figures) in the years of 1980-2018. The data for this study were collected from the World Bank and IMF international financial statistics and the selected countries’ annual data. In the study, panel data analysis was preferred after stasis analysis of the data. According to the results obtained, while trade volüme harms net errors and omissions, the increases in GDP are being affected positively in that direction. The inconsistencies are often unknown, although in some cases, explanations that require a review of statistics emerge later. Timing gaps, insufficient coverage, or methodological issues can cause imbalances. By finding the reason for the existence of the net error and omissions account, that is, its source, the quality of the balance of payments statistics can be further improved. Data sources should be chosen well, and laws and penal policies should be clearly stated to avoid problems.
Net Hata ve Noksan Hesabına Bakış: Seçilmiş Ülkelere Yönelik Analiz (1980-2018)Suna Şahin
Ekonomi ile ilgili yayınlarda net hatalar ve noksanlar konusunda yani net hata ve eksikliklerin kökenleri ve bunların ödemeler dengesi üzerindeki etkileri hakkında çok fazla analiz yapılmamıştır. Ayrıca, net hata ve noksanların ne derece kabul edilebilir olduğunu gösteren açıkça tanımlanmış bir cevap da bulunmamaktadır. Her ülkenin kendine has özellikleri vardır ve ödemeler dengesi uyumsuzluklarının varlık nedenlerini genellemek bu açıdan oldukça zordur. Bu çalışma, seçilen ülkelerin (Singapur, Malezya, Amerika Birleşik Devletleri, Uruguay, Filipinler) 1980-2018 yıllarında ödemeler dengesi hesaplarındaki ‘net hata ve noksan’ hesabının makroekonomik değişkenlerle (GSYİH, ithalat ve ihracat rakamları olarak kabul edilen ticaret hacmi) olan ilişkisini araştırmaktadır. Çalışmaya ait veriler, Dünya Bankası ve IMF uluslararası finans istatistiklerinden alınmıştır ve seçilen ülkelerin yıllık verileri kullanılmıştır. Çalışmada, verilerin durağanlaştırılması sonrası, panel veri analizi tercih edilmiştir. Elde edilen sonuçlara göre ticaret hacmi net hata noksan üzerine negatif bir etki yaparken, GSYİH net hata noksanı pozitif yönde etkilemektedir. Tutarsızlıkların nedenleri genellikle bilinmemekle birlikte, bazı durumlarda istatistiklerin gözden geçirilmesini gerektiren açıklamalar daha sonra ortaya çıkmaktadır. Zamanlama boşluğu, yetersiz kapsam veya metodolojik sorunlar dengesizliklere neden olabilir. Net hata ve noksan hesabının varlığının nedeni yani kaynağının bulunmasıyla, ödemeler dengesi istatistiklerinin kalitesi daha da iyileştirilebilir. Veri kaynakları iyi seçilmeli ve sorunlar yaşanmaması adına bu konuda yasalar ve cezai politikalar net bir şekilde belirtilmelidir.
Balance of payments statistics is considered an integral part of national accounts for most countries globally. The balance of payments account is essential in analyzing and forecasting the country’s economic performance and in formulating economic policy, including monetary and exchange policy. Net errors and omissions are accounts that result from inconsistencies in the double-entry accounting system due to misrecorded or missing items. The net balance of errors and omissions constitutes the balancing item. The balancing element can be interpreted differently and its analytical content and meaning change accordingly. The sum of all transactions on the credit side must equal the sum of all transactions on the debit side (with a minus sign). Therefore, it is necessary to collect data as efficiently as possible, process it, and promptly present it to the user. Even the most precise and accurate data will not be helpful if provided too late because, as a result, there will be a specific difference between credit and debit.
Given that the principle of double-entry bookkeeping requires that these two sides be numerically equal, errors and omissions arise equal to the difference between credit and debit. Therefore, errors and omissions, as a balancing item of the balance of payments account, include all errors and omissions made in a given period when compiling balance of payments statistics. Net error and omission calculation have not been a subject of much attention, both in Turkey and in other countries, since it was thought that the errors and omissions in the balance of payments statement calculations would not be too significant. In this study, these countries were preferred because the net errors and omissions in the balance of payments table showed an increasing trend since 1980. In addition, it was chosen considering that the net errors and omissions, which are also stated as short-term capital inflows, have a positive effect on economic growth (the GDP figures, which are the economic growth indicators of the preferred countries, tend to increase each year). Whether there is a relationship between the ‘net errors and omissions in the balance of payments accounts and macroeconomic variables (GDP, trade volume considered as import and export figures) in 1980-2018, and if there is a relationship (positive/negative) with which variable. It has been tried to explain the empirical application it has shown. It requires introducing a compensatory entry known as net errors and omissions so that the sum of all international transactions in each country is equal to zero. The literature search shows relatively few studies on net errors and omissions or balancing elements. This study has concluded that the increase in imports and exports (trade volume) in selected countries harms net errors and omissions, while the increase in GDP positively affects net error omission in these countries. The inconsistencies are often unknown, although in some cases, explanations that require a review of statistics emerge later. Timing gaps, insufficient coverage, or methodological issues can cause imbalances. By finding the reason for the existence of the net error and omissions account, that is, its source, the quality of the balance of payments statistics can be further improved. Data sources should be chosen well, and laws and penal policies should be clearly stated to avoid problems. In addition, the movement of errors and omissions can be considered an essential indicator for those who direct the economic policy. In conclusion, it can be said that all these reasons clearly show that the calculation of net errors and omissions in the balance of payments is an economic indicator of the steps to be taken in general, not just in the field of statistics.