mutiplying bhe above real interest rates<sup>and the beginning of the month stocks</sup> of debt (base money in the case of the inflation<sup>tax). Annual real interest</sup> payments were then obtained adding up monthly<sup>interest payments.</sup>

## iii) Inflation TM.

Finally, the inflation-erosion of the stock<sup>of base money</sup><sup>**(a**wealth</sup> transfer to the public sector) was computed<sup>as fiscal rev-nue, i.e., the</sup> inflation tax. Since for most of the period<sup>commercial bank deposits at the</sup> Bank of Monico (a major component of the<sup>stock of base money) perceived an</sup> interest the inflation taw revenue was actually less<sup>than the loss in real</sup> value due to inflation of the initial stock<sup>of base money. The actual</sup> procedure followed to * ,imate the inflation<sup>tax rate (applied over the</sup> beginning of period stock of base money)<sup>**is:**</sup>

# (7) WM . [(l + iB<sup>M</sup> )/(1 + ir)1 - 1

where: *OBM is the inflation tax rats iBM is the nominal interest rate on average<sup>perceived by one</sup> unit of base money

## 2.2.3 National Accounts Data

The most difficult issue in the computation<sup>of national accounts is the</sup> distribution of supply into its demand<sup>components, e.g., consumption,</sup> investment, exports and stock accumulation.<sup>As we discuss below and, in more</sup> detail, in Annex A, the problems which<sup>arise in the measurement of aggregate</sup> demand components can be quite crucial<sup>for evaluating private saving and, in</sup> particular, for the choice of data frequency<sup>employed. From the discussion</sup> below, we conclude that the national accounts<sup>measure of both government</sup> consumption and the resource balance<sup>are relatively accurate while fixed</sup> invistment, private consumption and stock<sup>accumulation are relatively more</sup> noisy (stock accumulation being the more noisy<sup>as it generally contains a</sup> residual component) and strongly dependent<sup>on the quality of surveys of sales</sup> and stocks. Since surveys on sales are less complete for qrarterly<sup>data</sup> series (which, thus, are more noisy)<sup>we only discuss annual data.</sup> One general problem with the national<sup>account system in Mexico is that</sup> its base is probably outdated. Fixed coefficients<sup>employed to estimate</sup> current value-added are based on the 1980<sup>input-output matrix. Given the</sup> process of trade liberalization that Mexico<sup>has undergone in the 1980s,</sup> particularly, after 1985, the coefficients<sup>of value-added to value of</sup> production are likely to have changed significantly.<sup>For example, the</sup> substitution of imported inputs for domestic<sup>value-added in the production</sup> process is likely to have reduced the coefficient<sup>ofactual value-added to</sup> value of production in the industrial<sup>sector (see Annex A for a more detailed</sup> discussion of this point). In any case,<sup>this is a source of error in the</sup> measurement of savinq that we cannot do<sup>anything about.</sup> As mentioned, 'he most difficult issue<sup>in the computation of national</sup> accounts is the distribution of supply<sup>into its demand components. The usual</sup> problem with the distribution of demand<sup>components is that the relevant</sup> information is generally not available.<sup>Therefore, some assumptions have to</sup> be made. The balance of payments accounts<sup>normally provide fairly good</sup> information on imports and exports. Except<sup>for the exchange rate measurement</sup> difficulties of transforming foreign denominated<sup>series into local currency</sup> accounts, these series are fairly accurate. In many<sup>cases assigning total</sup> supply to the demand components can be facilitated<sup>by doing the supply/demand</sup> compatibilization at a level as disaggregated<sup>as possible. For instance,if</sup> a firm produces mostly machinery, it is clear<sup>that production should be</sup>