On expenditure/income discrepancies in national accounts in the presence of two price units

Makoto Saito

Japan and the World Economy, 2022, vol. 64, issue C

Abstract: This paper demonstrates that expenditure/income discrepancies appearing in national accounts are caused partly by the nominal distortion due to the presence of two price units, and partly by the real distortion due to the mismeasurement of expenditure items. In addition, it investigates how such statistical discrepancies reveal potentially important information about various informal, though not necessarily illegal, economic activities, which are not grasped fully by statistical or tax authorities in a central government. Three cases are explored in detail. First, after-consumption-tax prices are mixed with before-consumption-tax prices in aggregating expenditures. Second, black-market prices coexist with official prices in a heavily controlled economy. Third, prices are quoted in not only a conventional currency unit, but also a more valuable cryptocurrency unit; however, the latter unit is still evaluated one to one with the former. Unlike in macroeconomic disequilibrium models, statistical discrepancies are not ex ante concepts, but they actually occur ex post. This paper examines how ex post excess demand/supply within the formal economy, resulting from such discrepancies, is adjusted by monetary and nonmonetary interactions with the informal or underground economy.

Keywords: Expenditure/income discrepancies; Price units; Price control; Cryptocurrency; Underground economy (search for similar items in EconPapers)
JEL-codes: E01 E40 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:japwor:v:64:y:2022:i:c:s0922142522000469

DOI: 10.1016/j.japwor.2022.101161

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