Flow of Funds Models

As we have been emphasizing throughout this volume, the structure of financial markets and policy intervention is changing, perhaps more rapidly than in any other time in history. Moreover, new technologies are allowing the development of financial instruments and management strategies that were thought to be unrealistically complicated only a short time ago. Accompanying the increased sophistication of financial instruments and their management has come increased participation in complex financial transactions by all sectors of the economy. Hence, the development of rigorous analytic tools for the study of national and international financial activity has been the subject of increasing research interest.