Scoreboard for the Surveillance of Macroeconomic Imbalances - European Commission - direct link to annual scorebord
As part of the response to the challenge of the actual monetary crisis, the EU institutions adopted several legislative proposals, the so-called 'six pack', to enhance the economic governance in the EU. The central part of this package is a new surveillance procedure for the prevention and correction of macroeconomic imbalances – called the Macroeconomic Imbalance Procedure – MIP. Under its preventive arm, the MIP aims at detecting the emergence of imbalances early-on. In case of existing serious imbalances, the corrective arm of the procedure requires the Member State to put in place a detailed policy plan to achieve their correction and provides means to effectively enforce it. The MIP is built around a "two-step" approach. The first step is an alert mechanism which works as a filter. The objective of the alert mechanism is to focus attention to observed risks early on and identify the countries for which, in the second step, more in-depth analysis appears warranted so as to assess their vulnerability and substantiate policy recommendations if appropriate.
Based on a set of four principles the new scoreboard contained ten indicators and envisaged that an additional indicator of the banking/financial sector will be developed by the end of 2012.
- The choice of indicators focuses on the most relevant dimensions of macroeconomic imbalances and competitiveness losses, with a particular emphasis on the smooth functioning of the euro area. For this reason, the scoreboard consists of indicators which can monitor external imbalances, competitiveness positions and internal imbalances, and encompass variables where both the economic literature and recent experiences suggest associations with economic crises.
- Secondly, the scoreboard (indicators and thresholds) are chosen as to provide a reliable signalling device for potentially harmful imbalances and competitiveness losses at an early stage of their emergence. This has led to a combination of stock and flow indicators which can capture both shorter term rapid deteriorations as well as the longer term gradual accumulation of imbalances. Moreover, it has led the Commission to set indicative thresholds at prudent levels, which on the one hand avoid excessive numbers of 'false alarms' but which on the other hand are not set so stringently that they only identify problems once they are entrenched. To this end, thresholds have generally been established via a statistical approach based on the distributions of the indicators' values, by identifying the thresholds as the lower and/or upper quartiles of the distributions: such thresholds are generally consistent with the values found in the empirical literature.
- Thirdly, the scoreboard has an important communication role. For this purpose, the scoreboard consists of a limited number of indicators. Moreover, the choice of indicators and transformations is kept as simple and straightforward as possible. Data transformations are transparent and tractable so that they can be replicated by third parties. The choice of indicators complements indicators/targets used in other EU surveillance exercises. For transparency reasons, the Commission will make the scoreboard indicators publicly available on its website.
- The fourth principle requires indicators to be of high statistical quality in terms of timeliness and comparability across countries. To this end, they are derived from data compiled according to the principles of the European Statistics Code of Practice of the European Statistical System (ESS). Where available, Eurostat sources are used so that the data comparability and statistical quality can be ensured. Otherwise, when Eurostat data are not available, the highest quality alternative data sources are chosen (e.g. the ECB).
The scoreboard consists of the following ten indicators with indicative thresholds (in brackets links to correspondig charts in our observatory) :
- •three-year backward moving average of the current account balance in percent of GDP, with a threshold of +6% and - 4% (8.5);
- •net international investment position in percent of GDP, with a threshold of -35% (9.2, 9.A);
- •five-year percentage change of export market shares measured in values, with a threshold of -6%;
- •three-year percentage change in nominal unit labour cost, with thresholds of +9% for euro-area countries and +12% for non-euro-area countries, respectively (4.3);
- three-year percentage change of the real effective exchange rates based on HICP/CPI deflators, relative to 35 other industrial countries, with thresholds of -/+5% for euro-area countries and -/+11% for non-euro-area countries, respectively (4.5, 4.C);
- •private sector debt in percent of GDP with a threshold of 160% (9.C); •
- private sector credit flow in percent of GDP with a threshold of 15% (9.B);
- •year-on-year changes in the house price index relative to a Eurostat consumption deflator, with a threshold of 6%;
- •general government sector debt in percent of GDP with a threshold of 60% (6.3, 6.B);
- •three-year backward moving average of the unemployment rate, with a threshold of 10% (2.A).