Macroeconomics in 3D: Three Sectoral Balances for 195 Countries, 1980-2025

This is an incomplete view which leaves out the private sector balance. The three sectoral balances must sum up to zero, by accounting identity (UN System of National Accounts 2008): (S – I) + (T – G) + (M – X) = 0 Economists using the two-dimensional view have famously missed the global financial crisis, while those using accounting models covering all three sectoral balances were able to predict it (Bezemer 2010, Galbraith 2012).

However, data on private sector deficits/surpluses is not readily available. Only the public and current account balances are published regularly by the IMF's World Economic Outlook. Beyond developed countries, looking at the private sector balance is critical for analyzing and crafting policies in developing countries.

The frequently recommended policy of 'fiscal consolidation', i.e. reducing public deficits, is revealed in the sectoral balances to also reduce, ceteris paribus, the private sector surplus (or increase its deficit), slowing down or even reversing development and poverty reduction (Assa and Morgan 2025). References: Assa, J., & Morgan, M. (2025). The General Relativity of Fiscal Space: Theory and Applications.

Review of Political Economy, 1-35. Bezemer, D. J. (2010). Understanding financial crisis through accounting models.

Accounting, organizations and society, 35(7), 676-688. Galbraith, J. K. (2012). Who are these economists, anyway?.

In Contributions in Stock-flow Modeling: Essays in Honor of Wynne Godley (pp. 63-75). London: Palgrave Macmillan UK. United Nations (2008).

System of National Accounts 2008. unstats.un.org/unsd/nationalaccount/sna2008.asp