This paper addresses the proper measurement of financial service output that is not priced explicitly. It shows how to impute nominal service output from financial intermediaries’ interest income and how to construct price indices for those financial services. We present an optimizing model...

Potential output is an important concept in economics. Policymakers often use a one-sector neoclassical model to think about long-run growth, and often assume that potential output is a smooth series in the short run--approximated by a medium- or long-run estimate. But in both the short and long...

Using data on gross output for two-digit manufacturing industries, we find that an increase in the output of one manufacturing sector has little or no significant effect on the productivity of other sectors. Using value-added data, however, we confirm the results of previous studies which find...

Aggregate productivity and aggregate technology are meaningful but distinct concepts. We show that a slightly-modified Solow productivity residual measures changes in economic welfare, even when productivity and technology differ because of distortions such as imperfect competition. We then...

A typical (roughly) two-digit industry in the United States appears to have constant or slightly decreasing returns to scale. Three puzzles emerge, however. First, estimates tend to rise at higher levels of aggregation. Second, estimates of decreasing returns in many industries contradict...

Productivity rises in booms and falls in recessions. There are four main explanations for procyclical productivity: (i) procyclical technology shocks, (ii) widespread imperfect competition and increasing returns, (iii) variable utilization of inputs over the cycle, and (iv) resource...

Explanations of procyclical productivity playa key role in a variety of business-cycle models. Most of these models, however, explain this procyclicaIity within a representative-firm paradigm. This procedure is misleading. We decompose aggregate productivity changes into several terms, each of...

This paper addresses the proper measurement of financial service output that is not priced explicitly. It shows how to impute nominal service output from financial intermediaries' interest income and how to construct price indices for those financial services. We present an optimizing model with...

Potential output is an important concept in economics. Policymakers often use a one-sector neoclassical model to think about long-run growth, and they often assume that potential output is a smooth series in the short run -- approximated by a medium- or long-run estimate. But in both the short...