Measuring the Value Added of the Financial Sector in Ireland

Mary Everett (), Joe McNeill and Gillian Phelan
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Joe McNeill: Central Bank of Ireland
Gillian Phelan: Central Bank of Ireland

Quarterly Bulletin Articles, 2013, 85-98

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.

Date: 2013-04
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Persistent link: https://EconPapers.repec.org/RePEc:cbi:qtbart:y:2013:m:04:p:85-98

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