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Financial Output as Economic Input: Resolving the Inconsistent Treatment of Financial Services in the National Accounts


  • Jacob Assa

    () (Department of Economics, New School for Social Research)


This paper investigates the inconsistent treatment of financial services in the national accounts. While net interest income from financial intermediation is netted out as input to other industries and thus does not affect the overall level and trend of Gross Domestic Product (GDP), fee-based net income from financial services is included as value-added, inflating GDP by the same amount. A new measure of economic activity which resolves this inconsistency is introduced, treating all financial income as a cost or intermediate input to the rest of the economy. The resulting aggregate tracks employment and median income far more closely than GDP.

Suggested Citation

  • 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.
  • Handle: RePEc:new:wpaper:1501

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    File Function: First version, 2015
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    References listed on IDEAS

    1. Leonidas Akritidis, 2007. "Improving the measurement of banking services in the UK National Accounts," Economic & Labour Market Review, Palgrave Macmillan;Office for National Statistics, vol. 1(5), pages 29-37, May.
    2. David Colander, 2014. "Gross Output: A New Revolutionary Way to Confuse Students about Measuring the Economy," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 40(4), pages 451-455, September.
    3. Deepankar Basu & Duncan K. Foley, 2013. "Dynamics of output and employment in the US economy," Cambridge Journal of Economics, Oxford University Press, vol. 37(5), pages 1077-1106.
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    More about this item


    Measurement of real output; employment; national accounting; finance;

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)

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