Measuring Wealth and Financial Intermediation and Their Links to the Real Economy

Measuring Wealth and Financial Intermediation and Their Links to the Real Economy

Charles R. Hulten and Marshall B. Reinsdorf

Print publication date: 2015

ISBN: 9780226204260

Publisher: University of Chicago Press

Abstract

This book examines economic measurement in light of lessons learned in the financial crisis. One set of papers investigates how gaps in the data contributed to our failure to spot emerging risks to financial stability before and during the crisis. These papers describe strategies for filling these gaps and for coping with the inherent dynamism of the financial marketplace. Another set of papers discusses recent changes in measuring financial activity in the areas of defined benefit pension plans and cross border investment income. These change the picture of saving by sectors, particularly households and state and local governments, and help explain some anomalies in net investment income receipts of the US. Other papers use micro data to investigate the effects of the crisis on households and nonfinancial businesses. They find that a third of households suffered financial distress during the crisis, but experiences varied greatly, and a sizeable minority experienced gains in wealth. The high variance of outcomes may have affected aggregate spending because households reported they would respond more strongly to losses in the value of their assets than to gains. Also increases in personal saving can be traced to changes in households’ borrowing, not increased contributions to savings and retirement accounts. Finally, nonfinancial businesses were strongly affected by a loss of access to external sources of funding for their liquidity and investment needs. The empirical results suggest that policies that increase access to credit might be more effective in ending the recession than policies aimed at stimulating demand.

Table of Contents

Introduction

Charles R. Hulten and Marshall B. Reinsdorf

I Advancing Economic and Financial Measurement Practice: Lessons from the Financial Crisis

2 Financial Statistics for the United States and the Crisis

Matthew J. Eichner, Donald L. Kohn, and Michael G. Palumbo

5 Financial Intermediation in the National Accounts

Carol A. Corrado and Charles R. Hulten

II Advances in Measuring Wealth and Financial Flows

6 Adding Actuarial Estimates of Defined-Benefit Pension Plans to National Accounts

Dominique Durant, David Lenze, and Marshall B. Reinsdorf

7 The Return on US Direct Investment at Home and Abroad

Stephanie E. Curcuru and Charles P. Thomas

8 US International Financial Flows and the US Net Investment Position

Christopher A. Gohrband and Kristy L. Howell

III How Did the Financial Crisis Affect Households and Businesses?

9 Household Debt and Saving during the 2007 Recession

Rajashri Chakrabarti, Donghoon Lee, Wilbert van der Klaauw, and Basit Zafar

10 Drowning or Weathering the Storm?

Jesse Bricker, Brian Bucks, Arthur Kennickell, Traci Mach, and Kevin Moore