Implications of the Asian Crisis on Estimating Internationally Comparable National Income

Abstract

The importance and use of internationally comparable national income accounts are well recognized. The Bank and other international organizations require internationally compa¬rable macroeconomic data for their decision-making process and operations. International development organizations use gross national product (GNP) as a key criterion in determining the devel¬opment status of member countries that often governs eligibility for concessional treatment in aid matters, such as soft loans, and in trading arrangements. At the same time, international rating agencies, financial institutions, and banks use internationally com¬parable GNP as an important factor to determine sovereign risk, credit risk, and other risk ratings of countries and their financial papers. The ratings are instrumental in determining the borrowing rate from the international market and the interest rate on financial paper. Furthermore, comparable GNP figures are useful to acade¬micians, multinational corporations, and investors. One important use of GNP figures by the Bank is to classify member countries into distinct groups based on GNP and debt repayment capacity. This classification governs the eligibility of member countries for soft loans. One of the major implications of the financial crisis is that some of the crisis-affected countries could be reclassified.