The total economy is defined in terms of resident units. A unit is said to be a resident unit of a country when it has a centre of economic interest on the economic territory of that country – that is, when it engages for an extended period (one year or more) in economic activities on this territory. The institutional sectors are groups of resident institutional units.
Resident units engage in transactions with non-resident units, that is, units which are residents in other economies. These transactions are the external transactions of the economy and are grouped in the rest of the world account. So, in the accounting structure of the national accounts, the rest of the world plays a role similar to that of an institutional sector, although non-resident units are included only in so far as they are engaged in transactions with resident institutional units. Consequently, as far as coding of classifications is concerned, a specific item for the rest of the world is included at the end of the classification of sectors.
Notional resident units, treated in the system as institutional units, are defined as:
a) those parts of non-resident units which have a centre of economic interest (that is in most cases which engage in economic transactions for a year or more or which carry out a construction activity for a period of less than a year if the output constitutes gross fixed capital formation) on the economic territory of the country;
b) non-resident units in their capacity as owners of land or buildings on the economic territory of the country, but only in respect of transactions affecting such land or buildings.
Validity of the definition