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2020 | Buch

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Flow of Funds Analysis

Innovation and Development

verfasst von: Prof. Nan Zhang

Verlag: Springer Singapore

Enthalten in: Springer Professional "Wirtschaft+Technik" , Springer Professional "Wirtschaft"

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Über dieses Buch

This book discusses the theory, methods, and applications of flow of funds analysis. The book integrates the basic principles of economic statistics, financial accounts, international finance, econometric models, and financial network analysis, providing a systematic and comprehensive introduction to the interconnection between these research fields. It thus provides the reader with the intellectual groundwork indispensable for understanding the workings and interactions of today’s globalized financial markets. The main focus of the book is how to observe the flow of funds in macroeconomics, how to measure the global flow of funds (GFF), and how to use GFF data to carry out an analysis. Based on the statistical framework for measuring GFF under the System of National Accounts, the book identifies the systematic relationship of financial linkages among economic sectors and with the rest of the world while integrating data sources that include stock data, geographically broken down by country–region, and selected financial instruments. It sets out the GFF concept and constructs a GFF matrix (metadata) on a from-whom-to-whom basis within a country-by-country pattern. Lastly, an established GFF matrix table is used to conduct an empirical study including an econometric model and financial network analysis.

Inhaltsverzeichnis

Frontmatter

Methods and Applications for Flow of Funds Analysis

Frontmatter

Chapter 1. Tracking the Development of Flow of Funds Analysis

Abstract

A country’s flow of funds accounts (FFA) provide a bird’s-eye view of the interdependence between real economy and financial economy from the macroeconomic perspective, reflecting the inflows, outflows, and stock of funds. With a history of more than 70 years, the statistical scope of this concept includes the domestic and overseas sectors, and most countries in the world have adopted this system as an international standard. This study reviews the historical background of FFA and briefly describes how the various updates of the versions of a system of national accounts (SNA) impact FFA and highlights the general situation of FFA. Furthermore, we analyze the FFA of the United States, Japan, and China and discuss the development and prospects of flow of funds statistics and methods of analysis.

Nan Zhang

Chapter 2. Statistical Observations on the Flow of Funds of China: 1992–2017

Abstract

In this study, we systematically analyze the flow of funds in the Chinese economy from 1992 to 2017 according to the theoretical framework of, and using statistics from, the flow of funds analysis. We observe the fluctuating characteristics of and changing trends in China’s industrial cycle and in its financial cycle from the perspective of the flow of funds analysis, discuss and analyze structural problems existing in the flow of funds in China, and offer some policy suggestions.

Nan Zhang

Chapter 3. The Flow of Funds Matrix and Financial Risk Measurement

Abstract

This research transposes the data from China’s Flow of Funds Account and Flow of Funds Matrix and clarifies the features of assets and liabilities between sectors. Then, using the Leontief Inverse principle, the author builds a ripple effect model for measuring financial risk, conducts a multiplier analysis to explain the risk ripple effects of each financial transaction item rankings, and analyzes the final ripple effect of systematic financial risk in China’s whole financial market. The results show that the systemic risk assessment of financial transaction instruments in China in 2017 exceeded the situation of the 2007 United States sub-prime crisis, which required special attention from policymaking authorities.

Nan Zhang

Financial Risk and External Flow of Funds

Frontmatter

Chapter 4. The Structural Transformation of the External Flow of Funds Between the U.S. And China

Abstract

This chapter explores the concept of the External Flow of Funds (EFF) and examines the structural transformation and risk posed by changes in the EFF between the U.S. and China. The U.S.’s double-deficit and China’s twin-surplus in the balance of payments, and the risk of China’s huge foreign reserves are statistically analyzed through three lenses: savings and investment, international trade, and international capital flows. Finally, this paper proposes economic policy changes to mirror the structural adjustment required for China’s economic development.

Nan Zhang

Chapter 5. An Econometric Model for Observing External Flow of Funds: Focus on Japan from 1980 to 2018

Abstract

In this chapter, a new methodology for developing a model for the external flow of funds (EFF) analysis is explained. A concept for developing an EFF analysis model is presented, the mechanism underlying the EFF is explained, and outlines of theoretical analyses from three different viewpoints are provided: the savings–investments balance, current balance flows, and international capital flows. Using this theoretical framework and the concepts of “net” and “two-way,” a descriptive statistical analysis is revealed to observe the characteristics of Japan’s capital outflows and inflows. Then, using economic and econometric theories, a simultaneous equation model is developed for EFF analysis and run the model to interpret the quantitative relationship of Japan’s EFF.

Nan Zhang

Chapter 6. Measuring Financial Stress and Vector Error Correction from a Global Flow of Funds Perspective

Abstract

This chapter constructs a statistical monitoring system and vector error correction model to measure risks to the global flow of funds (GFF). Taking China as a referent, we inspect how GFF and macroeconomic growth affected stability of financial systems and build statistical monitoring systems for GFF while referring to indicators of financial soundness. Then we link the real and financial economies and create a Chinese financial cycle index and financial stress index with regard to GFF. Third, VEC models observe how short-term fluctuations affect long-term equilibrium after external shocks. Fourth, we expand the empirical analysis based on these statistical methods and raise future issues for discussion.

Nan Zhang

New Challenges in Global Flow of Funds Analysis

Frontmatter

Chapter 7. Measuring Global Flow of Funds: Integrated Framework, Data Sources, and Approaches

Abstract

This chapter aims to provide a trial measurement for the global flow of funds (GFF), as discussed in four portions. First, the paper will define GFF to determine its statistical domains. Second, the document sets out the ideas and existing data sources and integrates them to measure GFF. These concepts and data sources are reflected in the balance of payments, international investment position (IIP), the Coordinated Direct Investment Survey (CDIS), the Coordinated Portfolio Investment Survey, the consolidated banking statistics (CBS), and the rest of the world account. Third, the balance sheet approach is used to break down the rest of the world into IIP components. An external statistics’ matrix (metadata) exercise shows the available external-sector financial data based on the IIP concept. Fourth, big data technology (BDT) was explored to integrate the data sources, and improve the timeliness of the existing data transmission, and illustrate how the GFF matrix operates.

Nan Zhang

Chapter 8. Measuring Global Flow of Funds: Methods and Applications

Abstract

This Chapter aims to establish a new statistical framework for measuring global flow of funds (GFF) based on its inherent mechanisms. It advances a previous theoretical discussion and develops a practical operational statistical matrix. Based on theoretical and practical possibilities the paper gets existing data from the International Investment Position, the Coordinated Direct Investment Survey, the Coordinated Portfolio Investment Survey, and International Banking Statistics are integrated for measuring GFF. The main outcome is a prototype GFF matrix that includes stock data geographically disaggregated by country/region and selected financial instruments. The paper presented GFF Matrix compiled with the pattern of ‘Country vis-à-vis Country’ matrix, and through using the GFF matrix to analyze the basic status, mutual relationship and existing problems between China, Japan, and the United States in the external financial positions.

Nan Zhang

Chapter 9. Measuring Global Flow of Funds: Dynamics of Portfolio Investment Among G-20 Countries

Abstract

This study establish a GFF statistical matrix for the G20, which can be used to evaluate the financial risks and influences among its members, and to estimate bilateral exposures between countries for three different financial instruments within and across the G20 economies. We use a financial network analysis to construct an empirical analysis of financial relationships within the G20, focusing on the effects of a shock to portfolio investments in the United States, China, and Japan. We use who-to-whom (W-to-W) matrices to study the local propagation dynamics of shocks in investment and financing for the three countries. To that aim, we propose a decomposition of shocks into n-order effects on the basis of an “inverse of Leontief” representation of the W-t-W matrices. We further propose an eigenvector decomposition of the effects to provide an analytical description of the propagation process.

Nan Zhang

Chapter 10. Measuring the Global Flow of Funds: Focus on Cross-Border Bank Credit Among G20 Countries

Abstract

An important revelation of the 2007–2008 global financial crisis is the need to strengthen effective tools for monitoring cross-border financial risks. This chapter, based on the W-t-W framework of the global flow of funds (GFF), uses locational banking statistics (LBS) data of the Bank for International Settlements (BIS) and attempts to establish an information system to clarify global uncertainty from the viewpoint of the GFF by investigating the uncertain shocking influence of cross-border financing. This paper discusses an analytical method using network theory and econometric models for the GFF and uses countries in the G20 as the research sample to focus on network centrality, mutual relationships, and the financial risk of cross-border bank credit among the United States, Japan, and China. The dyadic structure of the data allows supply and demand factors to be disentangled and the better identification of the effect of uncertainty shocks on cross-border loans.

Nan Zhang

Titel: Flow of Funds Analysis
verfasst von: Prof. Nan Zhang
Verlag: Springer Singapore
Electronic ISBN: 978-981-15-7720-8
Print ISBN: 978-981-15-7719-2
DOI: https://doi.org/10.1007/978-981-15-7720-8