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Real output of bank services: what counts is what banks do, not what they own
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 ...
The value of risk: measuring the service output of U. S. commercial banks
Rather than charging direct fees, banks often charge implicitly for their services via interest spreads. As a result, much of bank output has to be estimated indirectly. In contrast to current statistical practice, dynamic optimizing models of banks argue that compensation for bearing systematic risk is not part of bank output. We apply these models and find that between 1997 and 2007, in the U.S. National Accounts, on average, bank output is overestimated by 21 percent and GDP is overestimated by 0.3 percent. Moreover, compared with current methods, our new estimates imply more plausible ...
What is the value of bank output?
Financial institutions often do not charge explicit fees for the services they provide, but are instead compensated by the spread between interest rates on loans and deposits. The lack of explicit fees in lending makes it difficult to measure the output of banks and other financial institutions. Effective measurement should distinguish between income derived from lending services and income derived from portfolio decisions about risk and duration, and should be consistent among bank and nonbank financial institutions.
Does Disappointing European Productivity Growth Reflect a Slowing Trend? Weighing the Evidence and Assessing the Future
In the years since the Great Recession, many observers have highlighted the slow pace of labor and total factor productivity (TFP) growth in advanced economies. This paper focuses on the European experience, where we highlight that trend TFP growth was already low in the runup to the Global Financial Crisis (GFC). This suggests that it is important to consider factors other than just the deep crisis itself or policy changes since the crisis. After the mid-1990s, European economies stopped converging, or even began diverging, from the U.S. level of TFP. That said, in contrast to the United ...