News, Noise, and Estimates of the "True" Unobserved State of the Economy

Which provides a better estimates of the growth rate of “true” U.S. output, gross domestic product (GDP) or gross domestic income (GDI)? Past work has assumed the idiosyncratic variation in each estimate is pure noise, taking greater variability to imply lower reliability. We develop models that relax this assumption, allowing the idiosyncratic variation in the estimates to be partly or pure news; then greater variability may imply higher information content and greater reliability. Based on evidence from revisions, we reject the pure noise assumption for GDI growth, and our results favor placing sizable weight on GDI growth because of its relatively large idiosyncratic variability. This calls into question the suitability of the pure noise assumption in other contexts, including dynamic factor models.

The Measurement of Banking Services in the System of National Accounts

The paper considers some of the problems associated with the indirectly measured components of financial service outputs in the System of National Accounts (SNA), termed FISIM (Financial Intermediation Services Indirectly Measured). The paper characterizes FISIM by a user cost and supplier benefit approach determining the price and quantity of various financial services in the banking sector. We examine the need for FISIM in the context of plausible alternative accounting schemes that could be used to account for financial services. The alternative accounting frameworks have implications for the labour and multifactor productivity of both the financial and nonfinancial sectors.User costs, banking services, deposit services, loan services, Total Factor Productivity growth, production accounts, System of National Accounts, FIS

THE INCENTIVE TO INVENT.

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