A Flow-Of-Funds Perspective on the Financial Crisis Volume I: Money, Credit and Sectoral Balance Sheets

Flow-of-funds accounts are a component of the national accounts system reporting the financial transactions and balance sheets of the economy, classified by sectors and financial instruments. The biggest financial crisis in a lifetime has shown how important it is to have a deep knowledge of the financial balance sheets of the main sectors of the economy and the financial flows that take place between them. This type of information is essential for a proper understanding of the transmission of monetary and financial shocks through the economy, thereby complementing traditional monetary analysis centred on bank balance sheets.

This publication takes a flow-of-funds perspective of the financial crisis. The book highlights the ongoing efforts in the central bank and academic community to gain a deeper understanding of the implications of the financial crisis for monetary analysis and to develop empirical tools to extract regularities from the rich flow-of-funds dataset. The authors cover in this respect the full range of financial assets held by different sectors of the economy, including the balance sheet of financial intermediaries, bank leverage issues and their implications for the supply of credit to the economy, as well as the portfolio choices, savings behaviour and debt financing of households and non-financial corporations. Over time, this should enable monetary policy-makers to apply the new insights and instruments for a richer analysis of credit cycles and the transmission of monetary policy via flow-of-funds variables.

Peter Praet, European Central Bank, Germany Carmelo Salleo, European Systemic Risk Board, Germany Richard Werner, University of Southampton, UK Roberto A. De Santis, European Central Bank, Germany Carlo A. Favero, Università Commerciale Luigi Bocconi, Italy Barbara Roffia, European Central Bank, Germany Ulrich Bindseil, European Central Bank, Germany Adalbert Winkler, Frankfurt School of Finance and Management, Germany Claudio Borio, Bank for International Settlements, Switzerland Robert McCauley, Bank for International Settlements, Switzerland Patrick McGuire, Bank for International Settlements, Switzerland Riccardo De Bonis, Banca d’Italia, Italy Luigi Infante, Banca d’Italia, Italy Francesco Paternò, Banca d’Italia, Italy Tobias Adrian, Federal Reserve Bank of New York, USA Hyun Song Shin, Princeton University, USA Celestino Gíron, European Central Bank, Germany Silvia Mongelluzzo, Bocconi University, Italy S. Avouyi Dovi, Banque de France, France Vladimir Borgy, Banque de France, France Christian Pfister, Banque de France, France Michael Scharnagl, Deutsche Bundesbank, Germany Frank Sédillot, Banque de France, France Jacob Isaksen, Danmarks Nationalbank, Denmark Paul Lassenius Kramp, Danmarks Nationalbank, Denmark Louise Funch Sørensen, Danmarks Nationalbank, Denmark Søren Vester Sørensen, Danmarks Nationalbank, Denmark Laurent Maurin, European Central Bank, Germany Riccardo Bonci, Banca d’Italia, Italy