Any enquiry into the nature, performance, role, demerits, growth, efficiency, or other aspects of financial services such as banking and insurance activities, requires rigorous estimates of their economic output, i.e., the economic contributions made by these firms, as well as by the industries as a whole.
Accordingly, this book condenses several theoretical, methodological, empirical, and philosophical issues in conceptualizing, measuring, and empirically operationalizing the economic output of the banking and insurance industries. The analytical focus is on both Global and Emerging Markets perspectives. The book synthesizes applied and conceptual evidence to locate the chosen theme's analytical patterns, consensus, and disagreements. The selected subject matter is studied within the firm-level and aggregate settings, bringing literature of varied scopes together. Contributions from various international academics, practitioners, and policymakers further enrich the narrative.
The book concludes with data-driven case studies that analyze the extent to which the critical performance parameters of the banking and insurance industries in the BRIICS economies – including estimation of aggregate industry-level partial factor productivities, total factor productivity, technical efficiency, and returns to scale – vary concerning alternate measures of their output. The present work also provides a brief note on the inputs measurement dimension, following which there is a discussion on the limitations, future scope, and conclusions.
This work will be valuable for researchers and policymakers undertaking performance analyses related to banking and insurance activities. It shall provide them with the examination of a plethora of analytical options and related issues on the theory and praxis of output measurement, all finely organized into one single volume.
Author(s): Bhagirath Prakash Baria
Series: Banking, Money and International Finance, 33
Publisher: Routledge
Year: 2022
Language: English
Pages: 339
City: London
Cover
Half Title
Series
Title
Copyright
Dedication
Contents
Acknowledgements
Contributors
Foreword
Preface
1 Setting the analytical background
1.1. Background and introduction
1.2. Theory of output measurement: features of an ideal output measure for banking and insurance activities
Product-mix representativeness
Quality-adjusted measure
Robustness to regulatory interventions
Endogenous to the production function
Methodological robustness
Availability of multiple proxies
Maximisation criterion
Based on an output specification approach rather than ad hoc
Reflect the size of the firm or the industry
High correlation with other possible alternatives
Existence of an optimal corresponding price index
Ability to handle the multi-output nature of banking and insurance activities
Stable and rigid definition
Fully endogenous to the firm
Unitary influence factor
1.3. Final remarks
Notes
References
Part I Survey of evidences: theoretical and empirical issues
2 Qualitative and quantitative aspects of the survey of literature
2.1. Sample versus population dimensions of literature survey
2.2. Review strategy
2.3. Quantitative summary of the selected sample of studies
2.4. Problems in the purposive selection of studies
2.5. Background on further sections
Notes
References
3 Review of evidence on banking output measurement: global perspective
3.1. Introduction
3.2. Empirical sensitivity of banking performance estimates to alternative outputs
3.3. Approaches to output specification in the banking literature
Production approach
Intermediation approach
Asset approach
Value-added approach
User cost approach
Index numbers approach
3.4. Output measurement in the banking literature
Loan outputs
Deposit outputs
Asset output
Investment output
Income and off-balance-sheet output
FISIM output
National income accounts and banking output
3.5. Thematic issues in banking output measurement
Deflation of banking output
Stock versus flow dimensions in output measurement
Issues in economic aggregation
Some econometric dimensions in the literature
Monetary policy and the banking production function
Other issues
Appendix: Evolution of banking output measurement in the extant wisdom from 1950 to 2022
Notes
References
4 Review of evidence on insurance output measurement: global perspective
4.1. Introduction
4.2. Empirical sensitivity of insurance performance estimates to alternative outputs
4.3. Approaches to output specification in the insurance literature
Production approach
Intermediation approach
Value-added approach
National income approach
4.4. Output measurement in the insurance literature
Life versus nonlife insurance output
Premium output
Claims and loss output
Investment and financial assets output
Reserves as output
Income output
National income output of insurance
4.5. Thematic issues in insurance output measurement
Market structure, organisational structure and performance estimation
Output mix and output measures
Regulation and output measurement
Insurance output measurement in advanced versus emerging economies
Deflation of nominal output in insurance
Taxation and insurance output measurement
Appendix: Evolution of insurance output measurement in the extant wisdom from 1980 to 2022
Notes
References
5 Extended notes on the banking and insurance output measurement problem
5.1. Summarising the literature survey
5.2. Extended notes
Synthesising the concept and measure of outputs
Stock versus flow outputs
Nominal versus real outputs
Single versus multiple outputs
National income versus economic approaches
Dual nature of output specification problem
5.3. Background for further chapters
Notes
References
Part II Expert opinions and contributions: emerging markets perspective
6 Method and rationale
6.1. Motivation and rationale
6.2. Sampling strategy
6.3. Notes for the next chapter
Notes
7 Expert perspectives on output measurement in banking and insurance
Barendra Kumar Bhoi
Issues specific to the measurement of financial services in the system of national accounts 2008 in emerging economies
Difficulties in generating current price and constant price estimates of services output through the value-added method, including the issue of double deflation
Theory and measurement of financial services output versus other services
The great financial recession and key performance issues of the banking sector of the emerging economies
Structural changes in the composition of banking business from intermediation services to fund-based services and their implications for the importance of the FISIM approach
Further measurement issues in the output of the banking sector
Some issues in the input-output debate in banking output measurement
Debashis Acharya
Output measurement in banking services
Some issues with aggregation and aggregation functions in the current context
Some frontier issues in output measurement theory and practice
Edoardo Pizzoli
Satellite accounts, financial services and the use of SNA in emerging economies
Output of banks and some comments on its economic aspects
Notes on some allied issues
Frauke Kreuter
Traditional data collection systems and their emerging alternatives in the construction of macroeconomic statistics
Adoption of emerging alternative data sources in advanced economies and the emerging market economies
Some challenges faced by the emerging economies in traditional data collection
Justin Paul
Multi-output nature of banking and insurance production
Banking industry in the advanced versus emerging economies
Further remarks on measuring the output of the banking industry
Some issues in using financial statements as the fundamental source of output data for banks
N. R. Bhanumurthy
Notes on national income and other macroeconomic accounts
Financial services versus the tangibles in the estimation of output
Differences in economic structures and international comparisons
Input-output measurement in financial services, including the FISIM methodology
Some frontier issues in financial services output measurement
Pronab Sen
Emerging economies and the system of national accounts
Under- and overestimation of financial services output under economic shocks
Defining the output of services versus other industries
Dual intermediation roles of banks and the input-output debate
Finance-growth nexus in emerging economies
Some notes on insurance output measurement
Some frontiers of banking output measurement
R. B. Barman
Theoretical and empirical issues in the system of national accounts of emerging economies
Nature of financial services output
Comments on the FISIM approach in measuring banking output
Possible future developments in the output measurement of financial services
Ram Pratap Sinha
Insurance production as a multi-stage activity
Alternative approaches to the empirical estimation of insurance performance
Some issues in insurance input measurement
Some issues in insurance output measurement
Price measurement in insurance
Zhu Haiju
Measurement of output and its rationale
Nature of output in the services industry
Some empirical aspects of output measurement in the EMEs
Notes
References
Part III Empirical case studies: a BRIICS perspective
8 Empirical case studies for the banking industry on implications of using alternative output definitions
8.1. Rationale, methodologies and data
8.2. Empirical sensitivity of selected partial factor productivity estimates across the banking sector of BRIICS
8.3. Empirical sensitivity of total factor productivity and technical efficiency estimates across the banking sector of BRIICS
8.4. Empirical sensitivity of returns to scale estimates across the banking sector of BRIICS
Brazil
Russia
India
Indonesia
China
South Africa
8.5. Cross-country analysis
Appendix 1: Estimates of labour and capital (partial factor) productivities for section 8.2
Appendix 2: Estimates of residual total factor productivity index and technical efficiency scores for the section 8.3
Appendix 3: Estimated models for the returns to scale coefficients in section 8.4
Appendix 4: Estimates for section 8.5
Appendix 5: Input variables and estimates of output elasticities of inputs used in the construction of the total output index for section 8.3
Notes
References
9 Testing the empirical sensitivity of major performance indicators of the insurance industry under alternative output definitions: selected exercises
9.1. Background
9.2. Partial factor productivity estimates for the insurance industry
9.3. Total factor productivity and technical efficiency estimates for the insurance industry
9.4. Returns to scale estimates for the insurance industry of selected EMEs
Appendix 1: Estimates for Section 9.2
Appendix 2: Estimates for section 9.3
Appendix 3: Estimates for section 9.4
Notes
Part IV Extended notes and concluding remarks
10 Inputs measurement issues
10.1. Introductory note
10.2. Inputs measurement in the banking and insurance literature
10.3. Concluding remarks
Notes
References
11 Limitations, future scope and concluding remarks
11.1. Limitations and future scope
11.2. Final concluding remarks
Notes
References
Index
