Flow of Funds
Encyclopedia
Flow of funds accounts are a system of interrelated balance sheet
s for a nation, calculated periodically. There are two types of balance sheets, those showing
The sectors and instruments are listed below.
These balance sheets measure levels of assets and liabilities. From each balance sheet a corresponding flows statement can be derived by subtracting the levels data for the preceding period from the data for the current period. (In the statistical analysis of time series
, this operation is known as "first differencing.") The change in a level item between two adjacent periods is known as a "fund flow"; hence the name for these accounts.
The flow of funds accounts follow naturally from double-entry bookkeeping; every financial asset is also a liability of some domestic or foreign human entity. A fundamental fact about any economic sector is its balance sheet, a breakdown of its physical and financial assets, and of its liabilities. The only physical assets noted in the FF accounts are those of private nonfinancial sectors.
Financial sector:
Balance sheet
In financial accounting, a balance sheet or statement of financial position is a summary of the financial balances of a sole proprietorship, a business partnership or a company. Assets, liabilities and ownership equity are listed as of a specific date, such as the end of its financial year. A...
s for a nation, calculated periodically. There are two types of balance sheets, those showing
- The aggregate assetsAsset (economics)An asset in economic theory is an output good which can only be partially consumed or input as a factor of production which can only be partially used up in production. The necessary quality for an asset is that value remain after the period of analysis so it can be used as a store of value...
and liabilities for financial and nonfinancial sectors, and - What sectors issue and hold financial assets (instruments) of a given type.
The sectors and instruments are listed below.
These balance sheets measure levels of assets and liabilities. From each balance sheet a corresponding flows statement can be derived by subtracting the levels data for the preceding period from the data for the current period. (In the statistical analysis of time series
Time series
In statistics, signal processing, econometrics and mathematical finance, a time series is a sequence of data points, measured typically at successive times spaced at uniform time intervals. Examples of time series are the daily closing value of the Dow Jones index or the annual flow volume of the...
, this operation is known as "first differencing.") The change in a level item between two adjacent periods is known as a "fund flow"; hence the name for these accounts.
Main topics covered in the FF accounts
- Total debt broken down by issuer and holder
- Connection to national accounts, and derivation of measures of aggregate saving
- Fund flows originating in each sector
- Levels:
- AssetsAsset (economics)An asset in economic theory is an output good which can only be partially consumed or input as a factor of production which can only be partially used up in production. The necessary quality for an asset is that value remain after the period of analysis so it can be used as a store of value...
and liabilities for broad sectors and for specific financial sectors - Sectors issuing and holding instruments of a given class
- Assets
- Miscellaneous aggregate financial data
Organization of the flow of funds accounts of the US
The flow of funds (FF) accounts of the United States are prepared by the Flow of Funds section of the Board of Governors of the Federal Reserve System, and published quarterly in a publication called Release Z.1. The historical FF data, starting in 1952:I (quarterly) or yearend 1945 (annual), are available on the Fed's website.The flow of funds accounts follow naturally from double-entry bookkeeping; every financial asset is also a liability of some domestic or foreign human entity. A fundamental fact about any economic sector is its balance sheet, a breakdown of its physical and financial assets, and of its liabilities. The only physical assets noted in the FF accounts are those of private nonfinancial sectors.
Broad structure of the economy
Nonfinancial sectors:- HouseholdHouseholdThe household is "the basic residential unit in which economic production, consumption, inheritance, child rearing, and shelter are organized and carried out"; [the household] "may or may not be synonymous with family"....
s and nonprofit organizationNonprofit organizationNonprofit organization is neither a legal nor technical definition but generally refers to an organization that uses surplus revenues to achieve its goals, rather than distributing them as profit or dividends...
s - Nonfinancial firms
- CorporationCorporationA corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
s, farms excepted - Unincorporated firms, farms excepted
- Farms
- Corporation
- Government
- FederalFederal governmentThe federal government is the common government of a federation. The structure of federal governments varies from institution to institution. Based on a broad definition of a basic federal political system, there are two or more levels of government that exist within an established territory and...
- State & local
- Federal
- Rest of the world (foreign sector)
Financial sector:
- Firms
- Instruments