Improving the Treatment of Holding Gains and Default Losses in National Accounts

34 Pages Posted: 5 Dec 2017

See all articles by Marshall Reinsdorf

Marshall Reinsdorf

International Monetary Fund (IMF)

Dominique Durant

Banque de France

Kyle Hood

Government of the United States of America - Bureau of Economic Analysis (BEA)

Leonard I. Nakamura

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Date Written: December 2017

Abstract

Holding gains and losses and default losses play key roles in the operations and reported income of financial intermediaries and other businesses, but are excluded from the national accounts definition of income. Measures that combine income and holding gains/losses and that adjust the income of lenders for predictable default losses are needed to understand the operating results of businesses and the resources available to households, and should be presented in supplementary accounts. Changing the national accounts treatment of retained earnings of corporations to include retained earnings in the income of shareholders would provide improved insight into the roles of holding gains and saving in changes in the wealth of households and governments. To measure output properly in the core national accounts, apparent holding gains that are really payments for services must be distinguished from true holding gains, and expected default losses must be excluded from FISIM on loans.

Keywords: credit losses, financial intermediaries, holding gains, national accounts, saving

JEL Classification: E01, E21

Suggested Citation

Reinsdorf, Marshall and Durant, Dominique and Hood, Kyle and Nakamura, Leonard I., Improving the Treatment of Holding Gains and Default Losses in National Accounts (December 2017). Review of Income and Wealth, Vol. 63, pp. S321-S354, 2017, Available at SSRN: https://ssrn.com/abstract=3079947 or http://dx.doi.org/10.1111/roiw.12328

Marshall Reinsdorf (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Dominique Durant

Banque de France ( email )

Paris
France

Kyle Hood

Government of the United States of America - Bureau of Economic Analysis (BEA) ( email )

1441 L Street NW
Washington, DC 20910
United States

Leonard I. Nakamura

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States
215-574-3804 (Phone)
215-574-4364 (Fax)

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