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dc.contributor.authorWang, J. Christinaen_US
dc.contributor.authorBasu, Susantoen_US
dc.date.accessioned2006-07-24en_US
dc.date.accessioned2012-06-20T16:10:09Z-
dc.date.available2012-06-20T16:10:09Z-
dc.date.issued2005en_US
dc.identifier.urihttp://hdl.handle.net/10419/59250-
dc.description.abstractWhat is the output of financial institutions? And how can we measure their nominal and, more importantly, real value, especially since many financial services are provided without explicit charges? This paper summarizes the theoretical result that, to correctly impute the nominal value of implicit financial service output, the user cost of money framework needs to be extended to take account of the systematic risk in financial instruments. This extension is easy to implement in principle: One can continue using the current imputation procedure, and the only change needed is to adjust the reference rates of interest for risk. The paper clarifies why the risk-related income is not part of the output-or equivalently, why risk bearing is not a service-of financial institutions. The paper next argues that, to measure real output, one must first explicitly specify and define the economic services produced by financial firms, a step that is absent from the user cost of money theory. Once it is established that only financial services, and not instruments, should be counted as the value added of financial firms, it follows that the quantity of services provided by these institutions is not necessarily in fixed proportion to the volume of instruments. The corollary is that the implicit price of financial services bears no definitive relationship with any reference rate. Instead, price deflators for financial services should be constructed using methods similar to those used for other services.en_US
dc.language.isoengen_US
dc.publisherFederal Reserve Bank of Boston Boston, MAen_US
dc.relation.ispartofseriesPublic policy Discussion Papers, Federal Reserve Bank of Boston 06,3en_US
dc.subject.jelG21en_US
dc.subject.jelD24en_US
dc.subject.jelO47en_US
dc.subject.ddc330en_US
dc.subject.stwFinanzmarkten_US
dc.subject.stwFinanzintermediären_US
dc.subject.stwFinanzdienstleistungen_US
dc.subject.stwRisikomanagementen_US
dc.subject.stwMessungen_US
dc.subject.stwTheorieen_US
dc.titleRisk bearing, implicit financial services, and specialization in the financial industryen_US
dc.typeWorking Paperen_US
dc.identifier.ppn514870192en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
Appears in Collections:Public Policy Discussion Papers, Federal Reserve Bank of Boston

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