Glossary:Resident institutional unit
A resident institutional unit is an institutional unit that is resident because it has a centre of economic interest in the economic territory of a country (or a grouping like the European Union (EU) or the euro area).
The sectors of an economy are composed of two main types of institutional units:
- households and individuals who make up a household;
- legal and social entities, such as corporations and quasi-corporations (e.g. branches of foreign direct investors), non-profit institutions, and the government of that economy.
These institutional units must meet certain criteria to be considered resident units of the economy.
Residence is a particularly important attribute of an institutional unit in the balance of payments because the identification of transactions between residents and non-residents underpins the system. Residence is also important in national accounts because the residency status of producers determines the limits of domestic production and affects the measurements of gross domestic product (GDP) and many important flows.
The concept of residence is based on a sectoral transactor's centre of economic interest. It is necessary to recognise the economic territory of a country as the relevant geographical area to which the concept of residence is applied. An institutional unit is a resident unit when it has a centre of economic interest in the economic territory of a country.
The institutional unit is an elementary economic decision-making centre characterised by similarity of behaviour and decision-making autonomy in the exercise of its main function. A resident unit is regarded as constituting an institutional unit if it has decision-making autonomy for its main function and either keeps a complete set of accounts or it would be possible and meaningful, from both an economic and legal viewpoint, to make a complete set of accounts if they were needed.