Saturday, July 14, 2018

Confusion

However, claiming that imports reduce GDP as a matter of accounting is logically false.
Pierre Lemieux at Nonsense complains about national accounting and how it handles imports. He is right, imports are not domestic production and they do not subtract from GDP. Folks may misinterpret this, but the accounting is correct.  

The problem is that imports register a liquidity event that has to be removed precisely because it was not domestic. But it appears in a bank account as a purchase and the BEA needs to identify that entry for removal from GDP.

No one is being fooled and the accounting is not cheating.  The reason import and export purchases are aggregated is because there is generally one bank per boat, so the BEA can go to the bank and get both ins and outs from the same boat, strictly a utility short cut in dealing with accounts.


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