Page 160 - Invited Paper Session (IPS) - Volume 2

IPS195 Gabriel Quirós-Romero et al.
distributed to foreign portfolio investors and therefore, not distributed to the
owner. This is inconsistent with the treatment of retained earnings of a foreign
direct investment enterprise that are treated as if they were distributed to
foreign direct investors in proportion to their ownership of the equity of the
enterprise. It has been proposed that this treatment could be extended to
portfolio equity investment to help alleviate the measurement distortion.
However, a careful consideration of its implications and feasibility is warranted
before committing.

4. Digitalization
The broad topic. Digitalization encompasses a wide range of new
applications of information technology in business models and products that
are transforming the economy as well as welfare implications. The effects of
this technological innovation include sharply lower prices and increased
efficiency in computers, smart phones, and the Internet; new goods and
services; innovations in financial markets and new methods of payment (e.g.
Fintech); and reductions in costs and improvements in quality and efficiency
associated with the use of technology.
Digitalization: Progress made so far.
There is no generally agreed definition of the “digital economy” and
consequently a common metric to measure its size. While digitalization has
penetrated many activities, and almost the entire economy is affected-mostly
positively by digitalization, it is more realistic to focus the measurement of the
digital economy on a concrete range of economic activities at the core of
digitalization. The IMF (2018a) Executive Board paper on Measuring the Digital
5
Economy distinguishes a “digital sector” that covers the core activities of
digitalization, ICT goods and services, online platforms, and platform enabled
activities. Exercises such as these better highlight the digital economy without
making changes to the fundamental principles. Furthermore, digitalization
also raises measurement issues and new data needs for external, monetary
and financial sector statistics. Improved measurement of digital products and
transactions could improve measurement of inflation and balance of
payments as many of the online platforms are not resident in the economy of
the user. Recent work by the OECD, with IMF participation, on Measuring
Digital Trade and Digital Supply-Use Tables will provide more granular data to
better shed light on digital transactions and products based on an agreed
framework.
Another area in which progress has been made is clarifying the statistical
recording of crypto assets in the international standards. Crypto assets

5 https://www.imf.org/en/Publications/Policy-Papers/Issues/2018/04/03/022818-measuring-
the-digitaleconomy
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