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

Jacob Assa ()

No 1501, Working Papers from New School for Social Research, Department of Economics

Abstract: 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.

Keywords: Measurement of real output; employment; national accounting; finance (search for similar items in EconPapers)
JEL-codes: E01 E20 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2015-02
New Economics Papers: this item is included in nep-mac and nep-mfd
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