IDEAS home Printed from https://ideas.repec.org/a/cbi/qtbart/y2013m04p85-98.html
   My bibliography  Save this article

Measuring the Value Added of the Financial Sector in Ireland

Author

Listed:
  • Everett, Mary

    (Central Bank of Ireland)

  • McNeill, Joe

    (Central Bank of Ireland)

  • Phelan, Gillian

    (Central Bank of Ireland)

Abstract

The financial crisis has convincingly demonstrated the risks a large financial sector poses to society’s well-being. An informed debate on financial regulation after the crisis should, therefore, evaluate the sector’s contribution to economic activity. This requires an accurate measurement of the sector’s output, which is not a straightforward task. Despite government supports of €63.1 billion to Irish banks, the financial sector continues to add value within national statistical accounts, amounting to €15 billion in 2011. The article examines this conundrum. The current measurement of financial sector output is presented in this article. It finds that financial sector output is likely to have been overstated, particularly after the onset of the financial crisis. It then examines the methodological and conceptual issues that result in these counterintuitive measures. Measurement of financial sector output, reflective of economic reality, continues to be the subject of international statistical debate. The conclusion of these discussions is essential for further work in this area.

Suggested Citation

  • 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.
    • Handle: RePEc:cbi:qtbart:y:2013:m:04:p:85-98
    as

    Download full text from publisher

    File URL: https://centralbank.ie/docs/default-source/publications/quarterly-bulletins/qb-archive/2013/qb2-2013.pdf?sfvrsn=6#page=87
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Nicholas Oulton, 2013. "Has the Growth of Real GDP in the UK Been Overstated Because of Mismeasurement of Banking Output?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages 59-65, May.
    2. 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, January.
    3. Antonio Colangelo & Robert Inklaar, 2012. "Bank Output Measurement In The Euro Area: A Modified Approach," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(1), pages 142-165, March.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.
    2. FitzGerald, John & Kearney, Ide & Bergin, Adele & Conefrey, Thomas & Duffy, David & Timoney, Kevin & Znuderl, Nusa, 2013. "Medium-Term Review: 2013-2020, No. 12," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR12, march.
    3. Kelly, Anne-Marie & O'Leary, Brian, 2014. "Reinsurance in Ireland: Development and Issues," Quarterly Bulletin Articles, Central Bank of Ireland, pages 82-95, July.
    4. Doris Ritzberger-Grünwald & Alfred Stiglbauer & Walter Waschiczek, 2016. "Banking employment in Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 32, pages 80-100.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bertrand Groslambert & Raphaël Chiappini & Olivier Bruno, 2015. "Bank Output Calculation in the Case of France: What Do New Methods Tell About the Financial Intermediation Services in the Aftermath of the Crisis?," GREDEG Working Papers 2015-32, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    2. Kimberly D. Zieschang, 2016. "FISIM Accounting," CEPA Working Papers Series WP012016, School of Economics, University of Queensland, Australia.
    3. Robert Inklaar & J. Christina Wang, 2013. "Real Output of Bank Services: What Counts is What Banks Do, Not What They Own," Economica, London School of Economics and Political Science, vol. 80(317), pages 96-117, January.
    4. W. Erwin Diewert & Kevin J. Fox, 2018. "Alternative User Costs, Productivity and Inequality in US Business Sectors," Springer Proceedings in Business and Economics, in: William H. Greene & Lynda Khalaf & Paul Makdissi & Robin C. Sickles & Michael Veall & Marcel-Cristia (ed.), Productivity and Inequality, pages 21-69, Springer.
    5. Mª Pilar García-Alcober & Emili Tortosa-Ausina & Diego Prior & Manuel Illueca, 2014. "Cost and revenue efficiency in Spanish banking: What distributions show," Working Papers 2014/12, Economics Department, Universitat Jaume I, Castellón (Spain).
    6. Paolo Guarda & Abdelaziz Rouabah & Michael Vardanyan, 2013. "Identifying bank outputs and inputs with a directional technology distance function," Journal of Productivity Analysis, Springer, vol. 40(2), pages 185-195, October.
    7. Mª Pilar García-Alcober & Manuel Illueca & Diego Prior & Emili Tortosa-Ausina, 2016. "Risk-taking behavior, earnings quality, and performance in Spanish banking: A profit frontier approach," Working Papers 2016/19, Economics Department, Universitat Jaume I, Castellón (Spain).
    8. Raphaël Chiappini & Bertrand Groslambert & Olivier Bruno, 2022. "Liquidity matters when measuring bank output," Working Papers hal-03891613, HAL.
    9. Peter ven de Ven & Anne Harrison & Barbara Fraumeni & Marshall Reinsdorf & Dominique Durant & Kyle Hood & Leonard Nakamura, 2017. "Improving the Treatment of Holding Gains and Default Losses in National Accounts," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 63, pages 321-354, December.
    10. Diego Prior & Emili Tortosa-Ausina & María Pilar García-Alcober & Manuel Illueca, 2019. "Profit efficiency and earnings quality: Evidence from the Spanish banking industry," Journal of Productivity Analysis, Springer, vol. 51(2), pages 153-174, June.
    11. Chiappini, Raphaël & Groslambert, Bertrand & Bruno, Olivier, 2024. "A method to measure bank output while excluding credit risk and retaining liquidity effects," The Quarterly Review of Economics and Finance, Elsevier, vol. 94(C), pages 167-179.
    12. Emili Tortosa-Ausina & Diego Prior Jiménez, 2014. "Earnings quality and performance in the banking industry: A profit frontier approach," Working Papers 1405, Departament Empresa, Universitat Autònoma de Barcelona, revised Nov 2014.
    13. Fixler, Dennis & Zieschang, Kim, 2019. "Producing liquidity," Journal of Financial Stability, Elsevier, vol. 42(C), pages 115-135.
    14. Diewert, W. Erwin & Fox, Kevin J., 2016. "Alternative User Costs, Rates of Return and TFP Growth Rates for the US Nonfinancial Corporate and Noncorporate Business Sectors: 1960-2014," Microeconomics.ca working papers erwin_diewert-2016-7, Vancouver School of Economics, revised 30 Jun 2016.
    15. Groslambert, Bertrand & Chiappini, Raphaël & Bruno, Olivier, 2016. "Desperately seeking cash: Evidence from bank output measurement," Economic Modelling, Elsevier, vol. 59(C), pages 495-507.
    16. , & Diewert, Erwin, 2014. "The Treatment of Financial Transactions in the SNA: A User Cost Approach," Economics working papers erwin_diewert-2014-8, Vancouver School of Economics, revised 20 Feb 2014.
    17. Omneya Abdelsalam & Sabur Mollah & Emili Tortosa-Ausina, 2018. "Political connection and bank in(efficiency)," Working Papers 2018-11, Swansea University, School of Management.
    18. Robert Kornfeld, 2021. "Alternative Price and Volume Measures for Commercial Bank and Fund Management Services," BEA Working Papers 0184, Bureau of Economic Analysis.
    19. Nicholas Oulton, 2013. "Medium and long run prospects for UK growth in the aftermath of the financial crisis," Discussion Papers 1307, Centre for Macroeconomics (CFM).
    20. Thomas Philippon, 2015. "Has the US Finance Industry Become Less Efficient? On the Theory and Measurement of Financial Intermediation," American Economic Review, American Economic Association, vol. 105(4), pages 1408-1438, April.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cbi:qtbart:y:2013:m:04:p:85-98. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Fiona Farrelly (email available below). General contact details of provider: https://edirc.repec.org/data/cbigvie.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.