On the Mechanics of Measuring the Production of Financial Institutions

Jayasinghe, Milan (2005): On the Mechanics of Measuring the Production of Financial Institutions.

Abstract

With the emergence of new technologies, innovative financial instruments and the integration of global market operations national accountants are confronted with a series of new challenges and complexities in determining the output of financial institutions. The SNA93 recommended measure, the FISIM – financial intermediation services indirectly measured - which focused around the traditional deposits and loans business is currently under scrutiny as numerous views have been expressed questioning its validity in measuring the financial output. Critics have argued that the FISIM, as is defined, fails to capture the recent developments in financial markets and the technological advances and thus undermine the true economic contribution of these institutions. Several OECD task groups have examined this issue and currently considering changes to the existing methodologies. The goal of this study is two-fold. First, it explores a number of emerging areas in finance that are critically important for national accounting purposes. Second, by using the latest I-O tables the paper examines empirically how the recent technological advances and the global market environment have impacted the Canadian financial sector and provides some insights as to how the current SNA practices could be extended to account for such changes. *

• Item Type: MPRA Paper
• Language: English
• Keywords: FISIM, Financial Economics
• Subjects: C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General; P - Economic Systems > P3 - Socialist Institutions and Their Transitions > P34 - Financial Economics

References

Annual Reports (1993-2003), six major Canadian Banks Dow Jones Industrial Averages

Draft Final Report (August, 2003), OECD Task Force on Financial Services in National Accounts

Fixler, D. and Zieschang (1991), “Measuring the Nominal Value of Financial Services in the National Income Accounts,” Economic Inquiry, Vol. XXIX, pp. 53-68

Fixler, D. and Zieschang (1999), “The Productivity of the Banking Sector: Integrating Financial and Production Approaches to Measuring Financial Service Output,” Canadian Journal of Economics, 32(2), pp.547-569

Input-Output Tables, Statistics Canada (1990 –2001)

McIntosh, J. (2002), “A Welfare Analysis of Canadian Chartered Bank Mergers,” Canadian Journal of Economics, 35(3), pp.457-475

OSFI data, various years

System of National Accounts - SNA(1993)

Toronto Stock Exchange – data on trading activity