NEO

One of the data mysteries in Ireland in the last few years has been the accumulation of large “net errors and omissions” in the balance of payments in 2010-2012 (summing to €26.4 billion over that period) – the large measured current account surpluses should have a counterpart in large measured net financial outflows but these are not to be found in the data, with one interpretation that the net financial outflows has been of an “unrecorded” nature.  The data for Q1-Q3 in 2013 suggest that the NEO term this year should be small – but with no dent made in the large stock of NEO from the last few years.  (Usually,  negative NEO values are quickly followed by positive NEO values so that the accumulated stock reverts to zero.)

This matters in terms of understanding the overall international financial position of the economy, which is a key indicator for many investors and in relation to working out the repair of sectoral balance sheets in Ireland.

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9 thoughts on “NEO”

  1. On the face of it Ireland has recorded another record current account surplus on The BOP in q3 and the figure for the year, absent revisions ( a large caveat), could reach 10bn, or around 6% of GDP

  2. Note that 6% is the upper limit for the BOP surplus under the EU’s Macroeconomic Imbalances Procedure. So Ireland could face censure from Commissioner Rehn!

  3. Maybe Ireland should have negotiated an appropriate error bar for its MIP data to reflect its likely accuracy, say + or – 6%.

    NEO-classical oversight 😉

  4. Or indeed Eoin the relentless drumbeat beat of selling statistically insignificant mini ‘ ounces’ has caused spin fatigue, the figures are irrelevant and the fact retail sales fell by 1% vs same period last year shows a steady slow slide is still in progress

    Tull
    These magical bio similar export figs are interesting can you elaborate?

  5. I suppose most bond punters are not particularly interested as long as their payments are secure. Data quality goes with transparency, credibility and accountability. Ireland still has so much to do.

  6. John FitzGerald estimated that the BoP would have been 0.6% of GDP in 2012 without the windfall of headquarter companies.

    This area is a number cruncher’s nightmare.

    The Netherlands with its trillion dollar values in FDI pass-throughs and thousands of special finance vehicles has also a problem with errors as does Finland.

    The Finnish central bank looked at one problem area: trade credit given by exporters and accorded to importers.

    In Ireland’s case direct investment abroad exceeds inward investment – which shouldn’t pass a reality test.

    On the other hand, Apple had a market cap of $491 billion at Thursdays’ close – whereas in 2012, the combined inward/outward FDI was valued at EUR546 billion the book value.

    The CSO can determine how much of Ryanair’s equity is held abroad without much effort but trying to keep track of lots of IFSC funds is another story.

    There is also a common problem that statistics agency forms and surveys, are often completed by busy people with estimates that may not reflect reality because it’s too much of a hassle to verify them.

  7. when one takes kinsellas link, downloads the data (upper left side) and does the plot cumulative, it becomes more obvious.

    As mentioned here on Nov 5th in the thread “Economy policy voter …” ,
    the US have similar problems in their http://www.federalreserve.gov/releases/z1/current/z1.pdf
    look at table F.105.c Consolidated Statement for Federal, State, and Local Governments, line 58 “discrepancy”, and line 60 “Adjustments between NIPA and FOF”,

    and their “dark matter” problem in general.

    Sometime ago I read somewhere, if you sum up the national accounts of the world, about a trillion is “disappearing” per year

    net positions and current account numbers in e.g. the epp imbalance scorecard also have significant deviations

  8. These measurement /accounting “black holes” are vey common in large financial institutions. The issue is whether they are material or not to the overall picture. New CEOs often put REC teams and projects in place to “downsize” any issue….and then write off any balance (positive/negative), as quickly as possible….but overtime if necessary (if materially negative). Ireland can’t cope with that right now…..At least the legacy position is or appears to be “stable”…..Having been through a few large recs on this type of thing, my experience has been that much of the black hole is offsetable. A pragmatic approach to creating a revised base point normally suffices, provided the current and forward positions are more accurate. Relativity, materiality and all that.

    However, it does show that relative comparative data is very often more important than the absolute figures.when things are really out of kilter though, it becomes difficult to carry either a BS positive or negative position forward indefinitely.

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