EconPapers    
Economics at your fingertips  
 

A General-Equilibrium Asset-Pricing Approach to the Measurement of Nominal and Real Bank Output

J. Christina Wang, Susanto Basu () and John Fernald ()

No 14616, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper addresses the proper measurement of financial service output that is not priced explicitly. It shows how to impute nominal service output from financial intermediaries' interest income, and how to construct price indices for those financial services. We model financial intermediaries as providers of financial services which resolve asymmetric information between borrowers and lenders. We embed these intermediaries in a dynamic, stochastic, general-equilibrium model where assets are priced competitively according to their systematic risk, as in the standard consumption-based capital-asset-pricing model. In this environment, we show that it is critical to take risk into account in order to measure financial output accurately. We also show that even using a risk-adjusted reference rate does not solve all the problems associated with measuring nominal financial service output. Our model allows us to address important outstanding questions in output and productivity measurement for financial firms, such as: (1) What are the correct "reference rates" to use in calculating bank output? In particular, should they take account of risk? (2) If reference rates need to be risk-adjusted, should they be ex ante or ex post rates of return? (3) What is the right price deflator for the output of financial firms? Is it just the general price index? (4) When--if ever--should we count capital gains of financial firms as part of financial service output?

JEL-codes: E01 E44 G21 G32 (search for similar items in EconPapers)
Date: 2008-12
New Economics Papers: this item is included in nep-ban, nep-bec, nep-dge, nep-eff and nep-mac
Note: ME PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Published as A General-Equilibrium Asset-Pricing Approach to the Measurement of Nominal and Real Bank Output , J. Christina Wang, Susanto Basu, John G. Fernald. in Price Index Concepts and Measurement , Diewert, Greenlees, and Hulten. 2009

Downloads: (external link)
http://www.nber.org/papers/w14616.pdf (application/pdf)

Related works:
Chapter: A General-Equilibrium Asset-Pricing Approach to the Measurement of Nominal and Real Bank Output (2009) Downloads
Working Paper: A general-equilibrium asset-pricing approach to the measurement of nominal and real bank output (2004) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:14616

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w14616

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2021-06-18
Handle: RePEc:nbr:nberwo:14616