A World Accounting Framework: Trade and Financial Flows betweenDeveloping Countdes and the Rest of the World

The patterns of trade and fmancial flows between differentparts of the world economy have changed dramatically over the last twodecades. These changes have been accompanied by large increases indiscrepancies in macroeconomic statistics. Published data sources onglobal macroeconomic aggregates may be highly misleading because oftheir lack of consistency. A first necessary step towards the analysisof changes in the patterns of international trade and finance istherefore to develop a consistent global accounting framework in whichinternational finance can be placed in relationship to internationaltrade and domestic accumulation: this framework we call the WorldAccounting Matrix (WAM). The W AM is based on the concept that relatedvariables – international trade, fmancial flows and stocks, and domesticsaving and investments – should be presented in one framework thatexplicitly takes the relationships between the variables into account.It is an integrated data system centred around accumulation balances. Itpresents aggregates in matrix format, for groups of countries. Thepurpose of the W AM is (i) to bring data from various data sourcestogether in one framework in order to make better use of existingstatistics, (ii) to check for consistency and to disentanglediscrepancies both within and between data sources and to makeadjustments for the discrepancies, (iii) to provide an analyticalframework for the analysis of the effects of different types ofinternational capital flows and external shocks on economic growth andstability in developing countries and the role of international capitalflows in the process of global adjustment.