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

31 Pages Posted: 15 Jan 2009 Last revised: 29 Jan 2009

See all articles by Susanto Basu

Susanto Basu

Boston College, College of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Robert Inklaar

University of Groningen - Department of Economics

J. Christina Wang

Federal Reserve Bank of Boston

Multiple version iconThere are 3 versions of this paper

Date Written: December 2008

Abstract

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.

Suggested Citation

Basu, Susanto and Inklaar, Robert and Wang, J. Christina, The Value of Risk: Measuring the Service Output of U.S. Commercial Banks (December 2008). NBER Working Paper No. w14615, Available at SSRN: https://ssrn.com/abstract=1327236

Susanto Basu (Contact Author)

Boston College, College of Arts and Sciences, Department of Economics ( email )

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Robert Inklaar

University of Groningen - Department of Economics ( email )

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J. Christina Wang

Federal Reserve Bank of Boston ( email )

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Boston, MA 02210
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