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Has the growth of real GDP in the UK been overstated because of mis-measurement of banking output?

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  • Oulton, Nicholas

Abstract

If official figures overstated the growth of banking output in the UK in the recent boom, does this mean that GDP growth was overstated too? The answer is no. It is truer to say that if banking output was overstated then the output of some other industry or industries must have been understated, leaving GDP relatively unaffected. The reason is that the Office for National Statistics measures the real growth of GDP primarily from the expenditure side. And from the expenditure side most of the problematic part of banking output drops out since it constitutes intermediate consumption not final expenditure. Consequently, the effect of any mis-measurement of banking output on GDP growth in the boom of 2000-2007 is likely to have been small: GDP growth might have been overstated by about 0.1% p.a.

Suggested Citation

  • Oulton, Nicholas, 2013. "Has the growth of real GDP in the UK been overstated because of mis-measurement of banking output?," LSE Research Online Documents on Economics 49352, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:49352
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    Cited by:

    1. Nicholas Oulton, 2013. "Medium and Long Run Prospects for UK Growth in the Aftermath of the Financial Crisis," CEP Occasional Papers 37, Centre for Economic Performance, LSE.
    2. Everett, Mary & McNeill, Joe & Phelan, Gillian, 2013. "Measuring the Value Added of the Financial Sector in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 85-98, April.
    3. Pessoa, João Paulo & Van Reenen, John, 2013. "The UK productivity and jobs puzzle: does the answer lie in labour market flexibility?," LSE Research Online Documents on Economics 58010, London School of Economics and Political Science, LSE Library.
    4. McMahon, Michael & Malherbe, Frédéric, 2020. "Beyond Pangloss: Financial sector origins of inefficient economic booms," CEPR Discussion Papers 15180, C.E.P.R. Discussion Papers.
    5. Kritikos, Alexander S. & Schiersch, Alexander & Stiel, Caroline, 2021. "The Productivity Puzzle in Business Services," IZA Discussion Papers 14610, Institute of Labor Economics (IZA).
    6. Alexander S. Kritikos & Alexander Schiersch & Caroline Stiel, 2022. "The productivity shock in business services," Small Business Economics, Springer, vol. 59(3), pages 1273-1299, October.
    7. Jacob Assa, 2015. "Financial Output as Economic Input: Resolving the Inconsistent Treatment of Financial Services in the National Accounts," Working Papers 1501, New School for Social Research, Department of Economics.

    More about this item

    Keywords

    GDP; national income accounting; banking; financial services; mis-measurement;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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