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Has the Growth of Real GDP in the UK been Overstated because of Mis-Measurement of Banking Output?

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  • Nicholas Oulton

Abstract

If official figures overstated the growth of banking output in the UK in the recent boom, does this mean that GDP growth was overstated too? The answer is no. It is truer to say that if banking output was overstated then the output of some other industry or industries must have been understated, leaving GDP relatively unaffected. The reason is that the Office for National Statistics measures the real growth of GDP primarily from the expenditure side. And from the expenditure side most of the problematic part of banking output drops out since it constitutes intermediate consumption not final expenditure. Consequently, the effect of any mis-measurement of banking output on GDP growth in the boom of 2000-2007 is likely to have been small: GDP growth might have been overstated by about 0.1% p.a.

Suggested Citation

  • Nicholas Oulton, 2013. "Has the Growth of Real GDP in the UK been Overstated because of Mis-Measurement of Banking Output?," CEP Occasional Papers 33, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepops:33
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    Cited by:

    1. Pessoa, João Paulo & Van Reenen, John, 2013. "The UK productivity and jobs puzzle: does the answer lie in labour market flexibility?," LSE Research Online Documents on Economics 58010, London School of Economics and Political Science, LSE Library.
    2. Kritikos, Alexander S. & Schiersch, Alexander & Stiel, Caroline, 2021. "The Productivity Puzzle in Business Services," IZA Discussion Papers 14610, Institute of Labor Economics (IZA).
    3. Oulton, Nicholas, 2013. "Medium and long run prospects for UK growth in the aftermathof the financial crisis," LSE Research Online Documents on Economics 58239, London School of Economics and Political Science, LSE Library.
    4. Alexander S. Kritikos & Alexander Schiersch & Caroline Stiel, 2022. "The productivity shock in business services," Small Business Economics, Springer, vol. 59(3), pages 1273-1299, October.
    5. Jacob Assa, 2015. "Financial Output as Economic Input: Resolving the Inconsistent Treatment of Financial Services in the National Accounts," Working Papers 1501, New School for Social Research, Department of Economics.
    6. 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.
    7. Malherbe, Frederic & McMahon, Michael, 2024. "Beyond Pangloss: Financial sector origins of inefficient economic booms," Journal of Monetary Economics, Elsevier, vol. 145(C).

    More about this item

    Keywords

    GDP; national income accounting; banking; financial services; mis-measurement;
    All these keywords.

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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