Neutral holding gains/losses (K.11.1)

6.43 . Definition:

The neutral holding gain (K.11.1) on an asset is defined as the value of the holding gain that would accrue if the price of the asset changed over time in the same proportion as the general price level.

Neutral holding gains are identified to facilitate the derivation of real holding gains which redistribute real purchasing power between sectors.

6.44 . Let the general price index be denoted by r. The neutral holding gain (NG) on a given quantity q of an asset between times o and t is then given by the following expression:

NG=po X q (rt / ro - 1)

where po X q is the current value of the asset at time o and rt / ro the factor of the change in the general price index between times o and t. The same term rt / ro is applied to all assets and liabilities.

6.45 . There is no ideal general price index appropriate to calculate neutral holding gains. By convention, the general price index to be applied for the calculation of neutral holding gains is the price index for final national uses excluding changes in inventories.

6.46 . Neutral holding gains are recorded in the neutral holding gains/losses account, which is a sub-account of the revaluation account of the sectors, the total economy and the rest of the world.