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Real output of bank services: what counts is what banks do, not what they own

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  • Robert Inklaar
  • J. Christina Wang

Abstract

The measurement of bank output, a difficult and contentious issue, has become even more important in the aftermath of the devastating financial crisis of recent years. In this paper, we argue that models of banks as processors of information and transactions imply a quantity measure of bank service output based on transaction counts instead of balances of loans and deposits. Compiling new and comparable output measures for the United States and a range of European countries, we show that our counts-based output series exhibit significantly different growth patterns from those of our balances-based output series over the years 1997 to 2009. Since the U.S. official statistics rely on counts while European statistics rely on balances, this implies a potentially considerable bias in the estimate of bank output growth in Europe vis-à-vis that in the United States.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 11-1.

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Date of creation: 2011
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Handle: RePEc:fip:fedbwp:11-1

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Keywords: Banks and banking - Customer services;

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  1. Susanto Basu & Robert Inklaar & J. Christina Wang, 2011. "The Value Of Risk: Measuring The Service Output Of U.S. Commercial Banks," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 226-245, 01.
  2. Clark, Jeffrey A & Siems, Thomas F, 2002. "X-Efficiency in Banking: Looking beyond the Balance Sheet," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(4), pages 987-1013, November.
  3. Alan Morrison, 2000. "Credit Derivatives, Disintermediation and Investment Decisions," OFRC Working Papers Series 2001fe01, Oxford Financial Research Centre.
  4. Jagtiani, Julapa & Nathan, Alli & Sick, Gordon, 1995. "Scale economies and cost complementarities in commercial banks: On-and off-balance-sheet activities," Journal of Banking & Finance, Elsevier, vol. 19(7), pages 1175-1189, October.
  5. Ors, Evren, 2004. "Postmortem on the Federal Reserve's Functional Cost Analysis Program: how useful was the FCA?," Review of Financial Economics, Elsevier, vol. 13(1-2), pages 121-148.
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Cited by:
  1. Diewert, Erwin & Fixler, Dennis & Zieschang, Kimberly, 2012. "Problems with the Measurement of Banking Services in a National Accounting Framework," Economics working papers erwin_diewert-2012-14, Vancouver School of Economics, revised 04 Apr 2012.
  2. Burgess, Stephen, 2011. "Measuring financial sector output and its contribution to UK GDP," Bank of England Quarterly Bulletin, Bank of England, vol. 51(3), pages 234-246.

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