Measuring Interest Income in Economic Accounts for Conditions of High Inflation
Marshall Reinsdorf
Review of Income and Wealth, 2025, vol. 71, issue 3
Abstract:
Under conditions of high inflation, adjusting interest for inflation substantially changes the picture of the income and saving of the sectors included in the economic accounts, including financial corporations and government. Conflicting methods for adjusting interest for inflation in economic accounts for conditions of high inflation have been proposed by different experts. Vanoli argued that putting real interest in the current accounts would be inconsistent with the SNA definition of income and endorsed the use of “interest prime,” whose definition excludes the component of nominal interest that compensates for expected inflation. The proposed methods also differ in their treatment of the inflation compensation component of nominal interest in the accumulation accounts. I find that treating the inflation compensation as a capital transfer and using the same prices to value the opening balance sheet, flows, and closing balance sheet results in an internally consistent, fully integrated set of inflation‐adjusted economic accounts.
Date: 2025
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https://doi.org/10.1111/roiw.70027
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Persistent link: https://EconPapers.repec.org/RePEc:bla:revinw:v:71:y:2025:i:3:n:e70027
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