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Measuring real bank output: considerations and comparisons
Robert Inklaar and J. Christina Wang
Robert Inklaar is an associate professor at the University of Groningen, the Netherlands; J. Christina Wang is a senior economist at the research department of the Federal Reserve Bank of Boston. Email: R.C.Inklaar@rug.nl and Christina.Wang@bos.frb.org. The views expressed in this paper are those of the authors and not necessarily those of the Federal Reserve System or the Federal Reserve Bank of Boston.
The recent financial crisis highlights the critical role of financial intermediaries, including commercial banks, in maintaining the health of the real economy. It is important, therefore, to measure the real output of banks accurately. However, the measurement of real bank output has proven difficult. Much of the difficulty stems from the fact that banks do not charge explicit fees for many of their services. Moreover, the banking industry has undergone major transformations over the last few decades in terms of its production technology, regulatory environment, organizational structure, and range of product offerings. These changes further complicate the measurement problem. This article applies a coherent framework in order to evaluate and compare the two main approaches used in official statistics which measure real bank output that is not explicitly charged for. It then suggests areas for further improvements.
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