The statistical discrepancy in the U.S. international transactions accounts: sources and suggested remedies

The statistical discrepancy in the U.S. international transactions accounts has tended to be both large and positive over the last decade and a half. In 1990 the statistical discrepancy rose by $45 billion to a record $64 billion and brought the cumulative discrepancy since 1960 to almost $250 billion. The size and persistence of this discrepancy has called into question the accuracy of the data on the U.S. current and capital accounts. ; This paper attempts to find clues to the sources of the statistical discrepancy by 1) reviewing past history, 2) examining the data sources for each major component of the U.S. international transactions accounts, and 3) using regression analysis. The paper concludes with a list of recommendations for data improvements. ; While inadequacies are evident in the data for a wide variety of international transactions, both current and capital account, the search for sources of the big increase in the discrepancy between 1989 and 1990 probably can be narrowed largely to the capital account. It seems unlikely that net exports of goods, services, or investment income increased by an additional $45 billion in 1990. On the capital account side, increases in foreign holdings of U.S. currency probably played a significant role, but the bulk of the increase in the statistical discrepancy in 1990 remains a mystery.