Flow of funds (FoF)
Introductory notes:
- part of or extenstion of system of national accounts (link to SNA refresher):
gross savings = fixed cap investment + net lending + stat discrepancy - balance sheet (stock) and transaction (flows) tables
- sectors x instruments table ('2d'), sectors x instruments x sectors table ('3d')
- valuation at market prices (different view on book value in corporate reports)
closing stock = opening stock + flow + revaluation + other changes (eg. writeoff)
Expected takeaways:
- bank-based (loan) vs market-based (bonds) financial system
- size of corporate debt (loans and bonds)
- more debt instruments (several types of loans, trade credit)
- cautious about:
- equity shows at market, not book value
- aggregation vs consolidation of exposures
- nonfinancial sector net position (net worth)
- discussion on what is missing in FoF statistics and where to find it
Suggested reading (methodology): Development of financial sectoral accounts. New opportunities and challenges for supporting financial stability analysis by Bruno Tissot November 2016. BIS/IFC
Excercise
Excel file (links inside):
- US
- Euro area
- Japan
- Russia
Interactive example: UK
Sector-to-sector instrument matrix ('3d'), link
To discuss: how does chart below prove UK is an international finance center?