NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Value of Risk: Measuring the Service Output of U.S. Commercial Banks

Susanto Basu, Robert Inklaar, J. Christina Wang

NBER Working Paper No. 14615
Issued in December 2008
NBER Program(s):   PR

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 estimates of the share of capital in income and the return on fixed capital.

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Document Object Identifier (DOI): 10.3386/w14615

Published: Susanto Basu & Robert Inklaar & J. Christina Wang, 2011. "The Value Of Risk: Measuring The Service Output Of U.S. Commercial Banks," Economic Inquiry, Western Economic Association International, vol. 49(1), pages 226-245, 01. citation courtesy of

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