INFLATION,NONOPTIMAL MONETARY ARRANGEMENTS AND THE BANKING IMPUTATION IN THE NATIONAL ACCOUNTS*

This paper demonstrates, with the use of some recent developments in neoclassical monetary theory, that the banking imputation problem in the national accounts arises because of the regulation of banks by Authorities. It demonstrates as well that the banking imputation problem is a manifestation of the failure of the Authorities to provide optimal monetary arrangements. Some comments on existing imputations, in the light of this theory, are provided.     

ON INTERNATIONAL TRADE IN BANKING SERVICES

In order to examine theories of domestic and international trade in banking, information is presented in this paper on the vast array of service charges banks levy on their customers, both resident and non-resident, and the complex of interest rates on deposits and loans that must be collected. Examination is also necessary of collection procedures of the various charges which central banks levy on banks, as well as interest rates paid on reserves, insurance premia on deposits and the like in order to test propositions that international trade in banking is a function of the various monetary policies followed by Monetary Authorities.     

THE TREATMENT OF “HOME OWNERSHIP” IN THE CPI*

This paper explores the imputed service price approach to the pricing of the services of consumer-owned-and-used durables in the construction of the consumer price index, using the services of owner-occupied housing as an illustration. A theoretical framework for analyzing this question is first developed. Certain practical problems are then discussed. The conceptual difficulty of constructing an appropriate rate of return on the basis of available data on interest rates and house prices, in the context of inflation, is explored. Two arguments are advanced that statistical agencies ought not to follow the imputed service price approach in pricing the services of owner-occupied dwellings and other consumer durables. On the one hand, nominal interest rates will, in any short period, reflect monetary policy and not any change in the money “rental” of owner-occupied houses. Second, movements in nominal interest rates will also reflect changes in the money price of pure consumption goods, as well as changes in the money price of houses. The argument is extended to other consumer durables and, in the limiting case, to monetary balances, and it is concluded that in all but trivial cases the application of the service price approach leads to price movements of little or no meaning.     

MORE ON THE MEASUREMENT OF TOTAL FACTOR PRODUCTIVITY

"As compared with Hicksian, Harrodian measures of the concept of total factor productivity which rigorously take into account the reproducibility of commodity capital inputs and the technological interdependence of modern production economies are advocated. A number of recent measures of total factor productivity are shown to be variants of the Harrodian approach, and certain problems of aggregation associated with the Hicksian measures are shown to be resolved by the Harrodian measures. An examination of the concepts of technical progress and vertically integrated sectors advanced by Professor Luigi L. Pasinetti and their relation to the Harrodian measures of total factor productivity is made."     

FURTHER THOUGHTS ON THE BANKING IMPUTATION IN THE NATIONAL ACCOUNTS*

The banking problem in the National Accounts arises because interest rates paid by banks on deposits are generally lower than the rates charged for loans and service charges levied by banks are generally less than the cost of the banking services provided. This paper offers two explanations for such observations: first there is the new neo-classical theory of private banking and central banking which suggests that they arise because of distorting “taxes” levied by regulating central banks. Second there is the Keynesian theory which accounts for the observations by the fact that the public good services of monetary stabilization supplied directly by the central banks and indirectly by private banks cannot be priced. Both theories account for the empirical observations giving rise to the banking problem. Neither theory lends support to the banking imputation currently carried out in most National Accounts.