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Has the Growth of Real GDP in the UK Been Overstated Because of Mismeasurement of Banking Output?

Published online by Cambridge University Press:  26 March 2020

Nicholas Oulton
Nicholas Oulton*
Affiliation:
Centre for Economic Performance, London School of Economics
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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 mismeasurement of banking output on GDP growth in the boom of 2000–7 is likely to have been small; GDP growth might have been overstated by about 0.1 per cent per annum.

Keywords

GDPnational income accountingbankingfinancial servicesmismeasurementE01G21
Type
Research Articles
Information
National Institute Economic Review , Volume 224 , May 2013 , pp. R59 - R65
Copyright
Copyright © 2013 National Institute of Economic and Social Research

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Footnotes

I thank Bill Martin, Marcus Miller, John van Reenen, Chris Giles, Simon Kirby and three anonymous referees for helpful comments and encouragement. All conclusions are my own. This paper was produced as part of the Productivity, Innovation and Intellectual Property Programme of the Centre for Economic Performance. The Centre for Economic Performance is financed by the Economic and Social Research Council.

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