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Measuring the Value Added of the Financial Sector in Ireland

Author

Listed:
  • Everett, Mary

    (Central Bank of Ireland)

  • McNeill, Joe

    (Central Bank of Ireland)

  • Phelan, Gillian

    (Central Bank of Ireland)

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.

Suggested Citation

  • Everett, Mary & McNeill, Joe & Phelan, Gillian, 2013. "Measuring the Value Added of the Financial Sector in Ireland," Quarterly Bulletin Articles, Central Bank of Ireland, pages 85-98, April.
    • Handle: RePEc:cbi:qtbart:y:2013:m:04:p:85-98
    as

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    File URL: https://centralbank.ie/docs/default-source/publications/quarterly-bulletins/qb-archive/2013/qb2-2013.pdf?sfvrsn=6#page=87
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    References listed on IDEAS

    as
    1. Nicholas Oulton, 2013. "Has the Growth of Real GDP in the UK Been Overstated Because of Mismeasurement of Banking Output?," National Institute Economic Review, National Institute of Economic and Social Research, vol. 224(1), pages 59-65, May.
    2. 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, January.
    3. Antonio Colangelo & Robert Inklaar, 2012. "Bank Output Measurement In The Euro Area: A Modified Approach," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 58(1), pages 142-165, March.
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    Cited by:

    1. Boris Cournède & Oliver Denk & Peter Hoeller, 2015. "Finance and Inclusive Growth," OECD Economic Policy Papers 14, OECD Publishing.
    2. Kelly, Anne-Marie & O'Leary, Brian, 2014. "Reinsurance in Ireland: Development and Issues," Quarterly Bulletin Articles, Central Bank of Ireland, pages 82-95, July.
    3. Doris Ritzberger-Grünwald & Alfred Stiglbauer & Walter Waschiczek, 2016. "Banking employment in Austria," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 32, pages 80-100.
    4. FitzGerald, John & Kearney, Ide & Bergin, Adele & Conefrey, Thomas & Duffy, David & Timoney, Kevin & Znuderl, Nusa, 2013. "Medium-Term Review: 2013-2020, No. 12," Forecasting Report, Economic and Social Research Institute (ESRI), number MTR12, July.

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