Ekaterine Mekantsishvili TSU assistant-professor
Macroeconomics is a branch of economics that deals with the structure and behavior of a national or regional economy.
It is primarily focused on predictive analysis of actions that individual agents make and the way their behavior will determine quantities and prices in specific markets.
Macro economical model of economic system includes the cycle of produced goods and service to assist the evaluation of consequences of fluctuations in national income. Its main purpose is to determine the intercommunication between production, distribution, consumption and accumulation. As well as connection between income, output and final consumption. Moreover, it also develops models that explain relationship between savings and investments. For the prime model of macroeconomics we can scrutinize the Social Accounting Matrix (SAM), which can be represented as a square matrix. SAM is a unique accounting system, that is used to determine economical accounts on the scale of state and region. It shows, on the basis of balanced indices dynamics, the production and its financial equivalents range of motion.
The main purpose of SAM is to formulate economical functioning on different stages of development and to reflect their interconnection. It is an improved and eminent technique, providing a conceptual basis for examining economical processes and their results. It can be seen as a means of presenting accounting production and statistics. It can be seen as a means of presenting the interaction between production, income, consumption and usage in a single matrix.
The SAM framework reconciles input-output analysis with national income and product accounts, which adopts double-entry accounting.The SAM is a snapshot of the economy that represents the expenditures and revenues for each production activity, commodity and value-added.
Accounting method is most commonly used in nations wealth inventorying, and adopts double entry accounting as well, reflecting ongoing processes in economic cycles.
Social accounting matrix is constructed by production cycle account. SAM is a tabular representation of the accounting identities, where incomings are equal to the outgoings for all sectors of the economy. Social accounting matrix on one hand, portrays the whole process of production along with economical developments, and reflects their usage on the other.
The first account is for the factors of production. The factors of production receive income from various production activities. Their difference gives total value added (or GDP). GDP is the value of all final goods and services produced in a specific country. The income account is presented in central account system, in which there are minor and major changes in the production process. There are three main branches of the income account, the purpose of which is to differentiate the three main stages of income cycle: production, distribution, and consumption. The main goal of the first group is to give sufficient funds to production. Additional costs contribute to such income sums like: taxes to countries production factors, as wells as, production and products taxes. Income account can be divided into three categories: employer wage, taxes for production and other factorial incomes, and mixed income. Incomes first group is shown in the matrix as primary income, and if these accounts are balanced it forms a saldo. The “rest of the world” has its role in formation of saldo as well.
The difference created from the transfers of the primary income is reflected in the secondary incomes account, in which the income is distributed according to the states ongoing socio-economic politics. In the result we get possessed income.
Income account ends with production activities. Production activity shows how much of the income comes from household economy, state organs and noncommercial organizations, household economics service, usage and savings. For other sectors the incomes are used for saving, in which the connection between usage and accumulation represents main character of economy.
Its shown that in economics, capital account savings can be equalized to investments, in which we mean accumulation of fundamental capital and alternation of means of production.
Financial account offers a clear snapshot about the influence of financial liquidation or purchase upon net credits. In those accounts are no final balanced statutes (no matter if balance can be achieved with saldos with foreign states). Financial assets purchase should be the same as financial obligations. This concludes all the chains of the operations, that began with reflection of economical affairs in production account.
The aggregate schedule represents product and service account. Like every other account, it has two parts, but its statutes are taken from other accounts. It describes overall resource volume, and consists of creation of products, service and import; intermediate and final consumption; main and circulating capital accumulation and export.
Thus, the matrix based on social accounting system is used for circulation of financial and material resources. It’s a production account for describing systemic analysis. It can be divided in three standard accounts: production, consumption, accumulation, and “the rest of the world”, which illustrates trade and financial relations.
Accountants approach to the operations registration of social accounting system lays ground to special form of macro economical account system. As mentioned above Social Accounting matrix is represented in the form of a square with rows and columns, which brings together data on production and income generation. Rows represent the production of incomes, resources, passives, credit operations. While columns correspond to their utilization. Their intersection shows connection between indicators, which we can call “blocks”. Each block has concrete economical meaning. The structure of the typical SAM contains the description of the numerical entries.
Social accounting systems representation as a shape of matrix differs from its linear shape with several technical characteristics:
· It is a more distinguished form of conjugate connection and interpretation in social accounting system;
· It gives opportunity to better depict homogeneity of indexes and case studies of accounts, or balance the regulation of whole social accounting system.
· With its help ( unlike the linear account) we can reduce total amount of indexes. It happens because in the matrix blocks the intersection of the corresponding accounts creates indexes that connects indices with different meanings.
· Because of its analysis and calculations, Social Accounting matrix enables us to simulate mathematical apparatus from macro economical accounts.
The major components of the basic social accounting matrix is shown in Table 1. It recognises 3 types of accounts, covering factors of economical accounts and account for rest of the world. These components reflect different aspects of economical flows:
– Production Accounts – balance of goods and service
– Consumption – balance of domestic products.
– Capital formation account – balance of capital expenses and its finance.
– Rest of the world – balance of taxes.
The data that is essential for construction of social accounting matrix is taken from the statistics department in the ministry of economics. On that basis, construction of SAM takes time.
A SAM provides comprehensive one-period information on variables, such as the structure, composition and the level of production, the distribution of income among households, and the factorial value-added. Similarly it can provide statistical information on consumption and production pattern of the economy, imports, exports, investment and so on. Construction of SAM covers partial formation of two different matrices.
– The indices sum of the rows is achieved 100 % and has a calculated indices part.
– The indices sum of the columns is achieved 100 % and has a calculated indices part as well. Macro economical dynamic analysis is conducted with the obtained matrix’s absolute and relative significance.