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This paper provides an analytical overview of the most widely used capital flow datasets. The paper is written as a guide for academics who embark on empirical research projects and for policymakers who need timely information on capital flow developments to inform their decisions. We address common misconceptions about capital flow data and discuss differences between high-frequency proxies for portfolio flows. In a nowcasting “horse race” we show that high-frequency proxies have significant predictive content for portfolio flows from the balance of payments (BoP). We also construct a new dataset for academic use, consisting of monthly portfolio flows broadly consistent with BoP data.

Terrorism financing is providing and distributing funds for terrorist operations. Although the cost of an individual terrorist attack may be small, terrorist organizations rely on a steady flow of funds to support their operational costs. These funds can be raised through various sources. Funds can be raised through legitimate sources, such as donations and charitable organizations. Funds can also be raised through criminal activities, such as drug trafficking, smuggling, kidnapping, and extortion. This paper will demonstrate that terrorist organizations, specifically Al-Qaeda and ISIS, are able to adapt and continuously finance themselves regardless of the United States counter-terrorism efforts. First, this paper will first collect information on how Al-Qaeda and ISIS funds themselves. Second, collect information on how the United States combatted funding for Al-Qaeda and ISIS. Third, conduct an analysis and discussion of how Al-Qaeda and ISIS kept adapting to the United States combatting efforts.

Deposits flow out of the US banking system in January and February and flow in later in the year. In response to this outflow, banks increase rates on retail deposit products in January, including time, savings, and money market deposit accounts. Banks tend to offer highest deposit rates in January, after which the rates decline monotonically, reaching the minimum in December. The effect is more pronounced after the financial crisis, when banks relied less on nondeposit borrowings to replace outflowing liquidity. Consistent with the seasonal outflow of deposits, increased reliance on deposits, especially demand deposits, is associated with a stronger January effect in deposit rates at the bank level.

While the literature on theoretical macroeconomic models adopting the stock-flow-consistent (SFC) approach is flourishing, few contributions cover the methodology for building a SFC empirical model for a whole country. Most contributions simply try to feed national accounting data into a theoretical model inspired by Wynne Godley and Marc Lavoie (2007), albeit with different degrees of complexity. In this paper we argue instead that the structure of an empirical SFC model should start from a careful analysis of the specificities of a country’s sectoral balance sheets and flow of funds data, given the relevant research question to be addressed. We illustrate our arguments with examples for Greece, Italy, and Ecuador. We also provide some suggestions on how to consistently use the financial and nonfinancial accounts of institutional sectors, showing the link between SFC accounting structures and national accounting rules.

We use the theoretical framework of Acharya and Naqvi (2019) to introduce a macro-financial model where the “reaching for yield” incentivized by a loosening monetary policy in the United States mitigates the diabolic loop in a Monetary Union. We provide empirical evidence that the introduction of an accommodative monetary policy by the Fed lowers the yields in US assets and increases liquidity and, by extension, the threshold above which a liquidity shock can damage a bank. This, in turn, incentivizes bank managers to optimize their portfolios by investing in risky assets. We use a monetary VAR to provide novel empirical evidence that there is an increase in the flow of funds to European assets, a result which can be attributed to the “reaching-for-yield” incentive. This portfolio balance channel attenuates the effects of financial fragility and improves government funding costs as well as credit conditions by providing liquidity to domestic banks and assets. As a result, the “reaching-for-yield” incentive mitigates the diabolic loop effect.

This paper revisits the period of substantial widening of external imbalances in advanced economies in the run-up to the global financial crisis and their adjustment since then. We take a granular look at these imbalances through the lens of their domestic counterpart: the net financial balance of the household sector, the government, non-financial corporations, and financial corporations. Our findings challenge the often-claimed view that the household sector lies behind most of the dynamics of the current account. In fact, we show that it is the non-financial corporation and the government sectors that account for the bulk of: (i) the co-movement with the standard set of fundamental covariates of the current account; (ii) the external adjustment and expenditure reduction in the aftermath of the global financial crisis; and (iii) the diverging dynamics during large and persistent current account imbalances. These results emphasize that analyzing domestic sectoral balances can lead to a better empirical and theoretical understanding of global imbalances.

We study the relationship between the accrual of large financial transfers from a central level of government and the incidence of white collar crimes against public administration and public faith at the local level. We analyse the case of EU funding to Southern Italy and make use of within-municipality variation in the flow of funds between 2007 and 2014. We find a statistically significant effect of transfers on white collar crimes: our estimates suggest that in the absence of EU funding disbursements, the annual number of white collar crimes in Southern Italy would have been 4 per cent lower. We acknowledge that the evidence we provide cannot be taken as fully conclusive given the possible simultaneity of criminal activities and funding assignments and disbursements. Nevertheless, we provide evidence that the correlations we estimated between transfers and white collar crimes are unlikely to be spurious or due to confounding effects.

This paper develops a discrete-time epidemiological model for the spread of economic crises across sectors in the United States for the period 1952-2015. It is the first to use an epidemiological approach with macroeconomic (Flow of Funds) data. An extension of the usual one-period Markov model to a two-period setting incorporates the concept of downturns that may either precede a crisis or from which the sector may recover and avert a crisis. The results indicate that the nonfinancial business and private depository institutions & money market mutual funds sectors are highly contagious while the monetary authority is the least contagious.

At age 17, Adam Smith accepted a Snell Fellowship to Oxford, agreeing to be ordained as a minister of the Church of England. Smith did not fulfill this obligation. Instead, Oxford officials agreed to allow him to transfer from the Ordination to the civil law tract; and, later, to leave Oxford early on a “compassionate leave.” Undoubtedly, Smith's life and writings would have been considerably different had he adhered to the terms of the Fellowship. How did this agreement come about? Until recently, Smith's biographers have not attended to this issue. In his new book, Kennedy (2017) provides the answer. Balliol College at Oxford, which housed the Snell Fellows, captured a major portion of each Fellow’s scholarship. Were Smith to abandon Oxford, Balliol would lose the funds associated with Smith's Fellowship. Hence the college officials had an incentive to make an agreement with Smith in a manner that maintained the flow of funds. To do so, they had to make accommodations with Smith. The purpose of this note is to provide a simple game theoretic exposition of Kennedy’s answer. This approach highlights both the strategic setting facing the bargaining parties as well as the gains from exchange.

In this paper we study an agent-based model of economy to investigate the impact of borrowing capacity on financial instability and contagion. We divide an economy into agents that interact via flow of funds and express the financial instability level of each agent as a function of the time derivatives of its wealth, cash inflows, and borrowing capacity. We show that among these factors the borrowing capacity, which itself is determined by other economic constraints, affects the most the financial instability, and it can even cause contagion through feedback loop formed by flow of funds. We use historical time series of the integrated macroeconomic accounts of the United Stated from 1960 to date to verify our conjecture by quantifying the financial instability levels of the agents under different level of borrowing capacity and how they affect one another during the period of the 2007-10 U.S. subprime mortgage crisis. Finally shortcomings from the limitations of data collecting practice is addressed along with partial yet compatible results for selected Eurozone countries.

We construct a new scenario analysis model for the United Kingdom using ONS data from 1987 to the present. The model links decisions about real variables to credit creation in the financial sector and decisions about asset allocation among investors for a wide array of financial assets. We develop, estimate, and calibrate the model from first principles as well as describing the stock-flow coherent database we construct to validate the model. We impose several scenarios on the model to test its usefulness as a medium term scenario analysis tool, including increases in banks’ capital ratios, sudden stops, changes in investment, increases in house prices and fiscal expansions.

Poor households worldwide rely on savings groups (SGs) to satisfy their financial needs, yet very little is known about these groups' ability to meet them. In this paper we develop a theoretical model illustrating the basic trade-offs in the functioning of SGs, and present stylized facts derived from the financial accounts of a sample of Ugandan SGs. The main conclusion from the theoretical model is that SGs lack a mechanism to ensure that supply of internal funds equals its demand. Consequently, SGs may be unable to generate sufficient funds to meet the demand for loans of their members. The model also highlights the importance of encouraging early savings, that can be lent out multiple times and ease the rationing of funds. Empirically, we find that groups do generate a significant flow of funds between members and provide a high return on savings. However, we also confirm the main theoretical predictions by showing that loans are rationed for a large fraction of the lending cycle. We conclude by discussing ways in which this mismatch between demand and supply of funds can be improved.

The Will of Alfred Nobel consequently promoting peace and innovations globally. Surprisingly the Will making the flow of funds out of earning from business of destructions. The fund accumulated is indicating a successful life cycle of invention and power of patenting the inventions. A wonderful story indicating role of a women influenced Alfred Nobel making a will to include a Prize for persons who promoted peace.

Understanding how capital flows within rural communities in sub-Saharan Africa can provide important insights on the nature of poverty and the effectiveness of financial intermediation interventions. In this paper, we use unique individual level savings and borrowing data to study the flow of funds within a sample of 104 Ugandan savings groups. We show that poor households borrow from wealthier households, which implies that the marginal benefit of money is decreasing in wealth. The result suggests that savings groups are effective at channeling funds to their poorest members.

The market for small-firm funds is constantly in flux. Imbalances in both the supply and the demand for capital can trace either to the flow of funds or to the flow of available deals. The legal environment can and does change, and can sometimes drive temporary supply and demand imbalances. Technological forces change the mechanisms that match suppliers of capital with those who demand the funds. During such periods, temporary problems matching suppliers of capital with entrepreneurs can occur. This shifting landscape both plagues markets and offers opportunities for market participants and researchers alike. Before discussions can be fruitful, though, we first address (but, we must admit, fail to answer) the prior question: What is an angel investor?

We analyze the impact role of advertising on the net inflows of pension funds, using a unique database that includes monthly information, asset allocation and the Flow of Funds (FoF) for all the pension funds in Israel. We also obtain the monthly $-value advertising per fund. Using these complementary databases to construct a unique empirical setting, we find that, in the majority of cases, the impact of advertising is insignificant and that the industry's NPV is negative. We show that, although superior performance leads to increased advertising, the campaigns are ineffective in terms of additional flow. In other words, only small fund families’ advertising campaigns create new flow.

This paper utilizes a new dataset of foreign and domestic mutual funds in Mexico to assess their behavior and obtains three new findings. First, foreign mutual funds are more sensitive to global financial conditions and engage more in herding and positive feedback trading than domestic mutual funds, notably during episodes of market stress. Second, the behavior of foreign funds differs substantially across types of funds: bond funds are more sensitive to global factors and engage more in positive feedback trading than equity funds; funds sold to retail investors, open-end funds, small funds, and regional funds also appear to be less stable sources of capital flows. Third, there is indicative evidence that foreign funds’ trading behavior is associated with higher local market volatilities, notably in periods of market stress; however, domestic mutual fund investors played some mitigating role.

This paper examines the evolution of intra-financial sector lending in the United States, 1950- 2012, presenting estimates constructed from the Federal Reserve’s Flow of Funds Accounts. We establish a number of stylized facts concerning the growth and composition of claims between financial institutions. We find that intra-financial sector lending as a share of total financial sector lending appears to have grown nearly five-fold since the 1950s. After comprising a tenth of all lending throughout 1950-1980, by 2011 lending between financial institutions accounted for nearly half of all financial sector lending. The stock of intra-financial assets has followed a similar trend. These grew rapidly during the 1980s and 1990s and presently account for nearly 30 percent of all financial sector assets. Although the growth of intra-financial assets accelerated after 1980, the fastest increase took place between 1991 and the bursting of the dotcom bubble in 2001, increasing from 15 to 25 percent of total financial sector assets. In the run up to the financial crisis of 2007-2008, the growth of intra-financial lending was concentrated in assets highly implicated in the genesis of the crisis, suggesting that this growth may have contributed to the crisis. This growth in intra-financial lending also raises questions about the contribution of the financial sector to the real economy: in the years before the financial crisis only 40 percent of financial lending was to the real economy. In recent years, we are witnessing similarly large shares of intra-financial lending.

This study uses newly available data in a quantitative examination of the relationship between Soviet special foreign trade earnings (SFEs) and changes in the money supply. During the Soviet era, SFEs were effectively taxes on imports and exports. They generated as much as 7–15% of state budget revenues in the 1970s and 1980s. The results show that changes in net foreign assets and the money supply accounted for around 10% of SFEs. The remaining 90% of SFEs involve redistribution of existing domestic funds within a constellation of government agencies and state-owned enterprises. The lack of data precluded further exploration of this redistribution.

Despite its enormous strides in economic development, India is yet to exhibit similar progress in its human development indicators like nutritional status of its children. In this context, this study examines the two prominent nutritional programs in Andhra Pradesh, namely Integrated Child Development Services operated through Anganwadi Centres (AWCs) and Nutrition cum Day Care Centres (NDCCs) operated by women self help group federations. It points out that the focus in AWCs is disproportionately on children above three years, while 90% of the brain’s growth happens in the first three years. While NDCCs model addresses this issue, the lack of steady flow of funds offsets the commendable nutritional programme in place. In addition, multiple departments handling maternal and child health (MCH) has blurred lines of accountability at the field level. Therefore, this report argues for a restructuring of MCH services by delineating services provided to children above three years and transferring them to education department. Health department could handle the rest of the MCH services, including the nutritional programmes through mothers’ committees. Such an arrangement will restore the focus on children below three years, draw up clear lines of accountability and increase the beneficiary participation in the delivery of MCH services.

This paper defines two accounting identities in the Flow of Funds Accounts (FOFA) that specify the level of transaction accounts (demand deposits) in the aggregate Bank balance sheet. The identities are called the Bank generator and the Fed generator (of transaction accounts in M1 money supply). The primary assumption underlying the development of the Fed generator identity is that only the central bank (Fed) can inject transaction accounts into the aggregate Bank which are not injected by the identity defining the Bank generator. A model is introduced to identify the sources and sinks of the M1 money supply in a four sector economy with Treasury, Fed, Banks, and Nonbanks. The model defines a set of abstract symbols linked to flow of funds data which reveal the basic structure of the U.S. financial system. Banks and Fed have the power to create and cancel transaction accounts as a component of the M1 money supply. Nonbanks do not have the power to create or cancel transaction accounts except during specific credit deals made with Fed and Banks. When Fed controls the interbank fed funds lending rate the Treasury must operate like an M1 user to avoid interfering with credit formation of Fed and Banks. Nonbanks can increase the M1 money supply by making withdrawals of currency which are serviced by Fed. Currency withdrawals by Nonbanks do not reduce the aggregate Bank balance sheet when Fed services the currency drain. When Nonbanks change levels of investment in money market mutual funds (MMMFs) this does not create or cancel transaction accounts in the M1 money supply. Nor do changes in the MMMF levels alter the size of the aggregate Bank balance sheet. Instead any change in the levels of MMMF investment simply force the aggregate Bank to adjust its mix of liabilities between deposits and money market instruments.

International financial linkages, particularly through global bank flows, generate important questions about the consequences for economic and financial stability, including the ability of countries to conduct autonomous monetary policy. I address the monetary autonomy issue in the context of the international policy trilemma: countries seek three typically desirable but jointly unattainable objectives: stable exchange rates, free international capital mobility, and monetary policy autonomy oriented toward and effective at achieving domestic goals. I argue that global banking entails some features that are distinct from broad issues of capital market openness captured in existing studies. In principal, if global banks with affiliates established in foreign markets can reduce frictions in international capital flows then the macroeconomic policy trilemma could bind tighter and interest rates will exhibit more co-movement across countries. However, if the information content and stickiness of the claims and services provided are enhanced relative to a benchmark alternative, then global banks can weaken the trilemma rather than enhance it. The result is a prediction of heterogeneous effects on monetary autonomy, tied to the business models of the global banks and whether countries are investment or funding locations for those banks. Empirical tests of the trilemma support this view that global bank effects are heterogeneous, and also that the primary drivers of monetary autonomy are exchange rate regimes.

This paper sets out an analytical framework for understanding the nature and significance of cooperation and collaboration in beneficial financial institutions like pension funds and sovereign wealth funds. Recognising that these types of institutions rarely face competition for the flow of funds, it is also noted that these institutions and other types of financial institutions compete with one another to realise target rates of return in global financial markets. At one level, these institutions can be quite parochial, even if there is a premium on institutional innovation. It is argued that in-sourcing and/or outsourcing the production of target rates of return may not provide senior managers sufficient flexibility to respond to changing market conditions. In this respect, cooperation and collaboration between financial institutions can be seen as a way of opening-up an ‘action space’ for innovation otherwise denied by the norms and conventions of the sector. In the penultimate section of the paper, examples of cooperation and collaboration are described noting the ways in which they enable senior managers to transcend home bias (the hegemony of local practice). Implications are drawn as to the limits of cooperation and collaboration, especially as regards the authority of senior managers.

A huge population size, a rapidly growing economy and increasing levels of urbanization, coupled with the dwindling sources of freshwater, have made management of urban water supply one of the most important priorities in the development agenda of India. Water supply in India is mainly a responsibility of the individual state governments which in turn delegate powers to the urban local bodies for provision of water and sanitation services to people at the city level. Water utilities in India are grappling with the problem of poor and aging infrastructure, high levels of unaccounted-for water, intermittent supplies, poor water quality and low tariff rates. Apart from the dwindling flow of funds from the state governments and external donors, the main source of revenues for the utilities is water tariffs collected from consumers; however, the latter is rarely enough to meet even the operation and management expenses. Hence, faced with the challenge of financing water infrastructure development and eliminating the management deficiencies of water utilities, India has been actively involved in reforming its water governance system since 1990s through revision of its laws and policies. Learning from the experiences of the rest of the world, India has been encouraging private sector participation in its water sector as well as developing innovative means of market-based financing mechanisms. This paper aims to explore the water sector reform in India and uses examples from the states of Karnataka and Tamil Nadu to highlight the use of private-public partnerships and pooled financing mechanisms to augment water supply.

Management Information System (MIS) lays a strong foundation on which any institution dealing with finance as a department relies on. Expansion of business, serving their existing client base, adding new customers to their family and to generate an aura of competition amongst the market are some of the key reasons firms across globe are using MIS systems. Microfinance sector needs MIS for gearing up economic stability, increasing performances and manage flow of funds because a high outflow of funds might fluctuate the economics of loan disbursement. This research paper focuses on the current structure of MIS systems in Micro finance sector and research on the existing scenario of competition with respect to various vendors offering simi lar services. The findings of the research indicate that currently there is diversity in the services and packages offered by vendors and there is a need to build up common software for all the microfinance institutions to bring in uniformity. © 2014 The Authors. Published by Elsevier Ltd. Selection and peer-review under responsibility of the Organizing Committee of ICTMS-2013.

We evaluate U.S. firms’ leverage determinants by studying how 1,801 firms paid for 2,073 very large investments during the period 1989-2006. This approach complements existing empirical work on capital structure, which typically estimates regression models for a broad set of CRSP/Compustat firms. If firms making large investments generally raise new external funds, their securities issuances should provide information about managers’ attitudes toward leverage. Our data indicate that large investments are mostly externally financed and that firms issue securities that move them quite substantially toward target debt ratios. Firms also tend to issue more equity following a share price runup or when the market-to-book ratio is high. We find little support for the standard pecking order hypothesis.

The recent crisis highlighted the importance of globally active banks in linking markets. One channel for this linkage is the liquidity management of these banks, specifically the regular flow of funds between parent banks and their affiliates in diverse foreign markets. We use the Great Recession as an opportunity to identify the balance-sheet shocks to parent banks in the United States and then explore which features of foreign affiliates are associated with protecting, for example, their status as important locations in sourcing funding or as destinations for foreign investment activity. We show that distance from the parent organization plays a significant role in this allocation, where distance is bank-affiliate specific and depends on the location’s ex ante relative importance in local funding pools and overall foreign investment strategies. These flows are a form of global interdependence previously unexplored in the literature on international shock transmission.

This paper uses macroeconomic data to measure the consumption of active investors that are wealthy and derive a large fraction of their income from the capital they own. The resulting stochastic discount factor is tested on the time series and cross section of asset returns and yields reasonable relative risk-aversion coefficient estimates using standard CRRA preferences. The main innovation of the paper is to use flow of funds and income data to measure consumption expenditure of active households: this allows us to construct a proxy even though no reliable direct measure is available. Stock prices do not only react to aggregate shocks but also to redistributional shocks between passive and active households.

In this paper, we introduce the FRBNY Consumer Credit Panel, a new longitudinal database with detailed information on consumer debt and credit. The panel uses a unique sample design and information derived from consumer credit reports to track individuals’ and households’ access to and use of credit at a quarterly frequency. In any given quarter ranging from the first quarter of 1999 to the present, the panel can be used to compute nationally representative estimates of the levels and changes in various aspects of individual and household liabilities. In addition to describing the sample design, the use of sample weights, and the credit report information included in the database, we provide some comparisons of population statistics and consumer debt estimates derived from our panel with those based on data from the American Community Survey and the Flow of Funds Accounts of the United States.

The institutions of Zakah and Waqf are among several instruments instituted by Islam to combat poverty and enhance welfare in the society. While Zakah helps generate a flow of funds and recruit the necessary manpower, Waqf provides the material infrastructure and creates a source of revenue for use in, among others, social welfare enhancing activities both at family, community and state levels. This paper discusses the role of Zakah and Waqf institutions in poverty alleviation. The paper is analytical with presentation based on survey of relevant literature with a view to adding to existing literature and synthesizing opposing views on the socio-economic role of Zakah and Waqf and the process of their revitalisation in the modern time. The paper posits that Zakah serves as a unique mechanism of compulsory transfers of income and wealth from the haves to the have-nots in the community. Through Zakah, every individual in the society is assured of minimum means of livelihood, which provides social security system in an Islamic society. Waqf on the other hand, has been used to provide the material infrastructure and create a source of revenue for use in, among others, social welfare enhancing activities both at family, community and state levels. The paper concludes that to activate and revitalise the Zakah and Awqaf systems in Muslim societies and communities, there is dire need for reform in their management formulars and to address the unsettled issues inherent in the institutions.

This paper sets forth a discussion framework for the information requirements of systemic financial regulation. It specifically describes a potential large macro-micro database for the U.S. based on an extended version of the Flow of Funds. I argue that such a database would have been of material value to U.S. regulators in ameliorating the recent financial crisis and could be of aid in understanding the potential vulnerabilities of an innovative financial system in the future. I also suggest that making these data available to the academic research community, under strict confidentiality restrictions, would enhance the detection and measurement of systemic risk. ; Supersedes Working Paper 10-22

When households make financial decisions, one may expect them to be both informative and rational – just as any other financial agent. In this paper, we question whether this hypothesis is error-free and correct by using a unique large-scale event study. Our results do not support the axioms of financial theory. However, our results are harmonious with the experimental literature, which, to be sure, suggests that agents use information inefficiently; they ignore it or misuse to the effect of bringing about suboptimal or even bad financial results. We use a unique event – an entirely new valuation mechanism that was "enforced" on the pension system and on the households – in order to study the behavior of individual investors. We find that under actual conditions – more similar to "real life" than any deliberated and designed experiment can give rise to – and while information and time are abundant, investors do not behave as if they are informed and rational. They behave in this uninformed and irrational way, nonetheless the availability of the information and the clear-cut possibility of utility-maximizing decision-making. Only when agents are provided with direct information and when the detailed consequence is analyzed for them, the households make a rational decision. We suggest that the gap between experimental conditions and actual situations may be the reason for the indecisive results appearing at the current experimental literature.

Our research addresses the issue of the likely nature of financial system activities by the end of 2011. Our specific focus is on the banking industry, although our analysis begins by considering the likely role of banks relative to other credit providers in the financial system. We employ a simple, straightforward methodology, relying mostly on Flow of Funds data to develop a broad, “bird’s eye” view of past and likely future banking industry activity. Conceptually, our main tack is to ask what banking industry activity would look like by 2012, were the industry to return to the trends underway before the housing price bubble took hold (i.e., pre-2001/2002). Using that artifice to approximate reasonably stable banking activity, we calculate the nature of banking activity across four dimensions: 1) credit extension and other asset-side activities; 2) funding (i.e., liability-side activities), and in particular whether projected funding is likely to be adequate to support projected credit extension; 3) banks’ capital position, were they to maintain at least the historically high tangible equity capital-to-assets ratios attained by the end of 2009; and 4) banks’ earnings prospect, and whether in particular earnings are likely to support necessary capital accumulation.

This paper presents an overview of changes in household wealth accumulation and saving using wealth data from three micro-level surveys: Survey of Consumer Finances (SCF), Panel Study of Income Dynamics (PSID), and Health and Retirement Study (HRS). We provide comparisons to the macroeconomic estimates of wealth accumulation and saving, explore problems in constructing household-level valuations of wealth, and assess the value of using household-level data sets to examine wealth accumulation and saving behavior in the United States.Our first analysis compares the macroeconomic estimates of wealth from the Flow of Funds to comparable measures from the SCF, PSID and HRS. The Flow of Funds and SCF valuations of net worth correspond closely up to 1998. Yet, after1998, the SCF reports a much more rapid acceleration of wealth, concentrated in equity-type assets. The estimates of wealth in the PSID and HRS are very similar to the SCF for the bottom 95 percent of the wealth distribution, diverging only for the top five percent of households.

The institutions of Zakah and Waqf are among several instruments instituted by Islam to combat poverty and enhance welfare in the society. While Zakah helps generate a flow of funds and recruit the necessary manpower, Waqf provides the material infrastructure and creates a source of revenue for use in, among others, social welfare enhancing activities both at family, community and state levels. This paper discusses the role of Zakah and Waqf institutions in poverty alleviation. The paper is analytical with presentation based on survey of relevant literature with a view to adding to existing literature and synthesizing opposing views on the socio-economic role of Zakah and Waqf and the process of their revitalisation in the modern time. The paper posits that Zakah serves as a unique mechanism of compulsory transfers of income and wealth from the haves to the have-nots in the community. Through Zakah, every individual in the society is assured of minimum means of livelihood, which provides social security system in an Islamic society. Waqf on the other hand, has been used to provide the material infrastructure and create a source of revenue for use in, among others, social welfare enhancing activities both at family, community and state levels. The paper concludes that to activate and revitalise the Zakah and Awqaf systems in Muslim societies and communities, there is dire need for reform in their management formulars and to address the unsettled issues inherent in the institutions.

The financial crisis has highlighted the need for models that can identify counter-party risk exposures and shock transmission processes at the systemic level. We use the euro area financial accounts (flow of funds) data to construct a sector-level network of bilateral balance sheet exposures and show how local shocks can propagate throughout the network and affect the balance sheets in other, even seemingly remote, parts of the financial system. We then use the contingent claims approach to extend this accounting-based network of interlinked exposures to risk-based balance sheets which are sensitive to changes in leverage and asset volatility. We conclude that the bilateral cross-sector exposures in the euro area financial system constitute important channels through which local risk exposures and balance sheet dislocations can be transmitted, with the financial intermediaries playing a key role in the processes. High financial leverage and high asset volatility are found to increase a sector’s vulnerability to shocks and contagion.

We estimate the demand for federal grants-in-aid to the states. Specifically, we analyze the flow of funds from the U.S. Environmental Protection Agency (EPA) to the states as a function of the structure of state political institutions, the political preferences of citizens and elected officials, the state's economic characteristics, and presence of several types of pollutants. We simultaneously model two dependent variables (the flow of EPA funds, and state environmental and natural resource budgets) to identify the independent causation of the two processes. Our results show that the flow of federal funds to states is greater under Democratic control of the state legislature and when the state has pro-environmental members in Congress. State environmental and natural resources spending is greater under Democratic control of the state legislature and when there are more conservation group members in the state. Republican control of the legislature, a larger manufacturing sector, and higher per capita income all lower state spending. For both dependent variables we find a variety of demographic and environmental quality effects. In contrast, we find no direct evidence for either flypaper or crowding out effects between federal funds and state spending.

This paper examines empirically both the relationship between voluntary disclosures and investor search costs, and the concomitant effect of disclosure on the flow of funds to mutual funds. We examine the disclosure frequency, timeliness and details of the portfolio disclosures of a sample of retail S&P 500 Index Funds. Our results show that mutual funds provide more information voluntarily when investor search costs are high, after controlling for their demand for information. This finding makes the case for the role of search costs in investors' information acquisition, which was not previously documented in the empirical disclosure literature. We also examine, endogenously, the costs and benefits associated with mutual fund managers' voluntary disclosure decisions. We find that funds disclose less information when the proprietary costs of the voluntary disclosure are high. Our results also show that mutual funds disclose information more frequently when their inflow is relatively low.

Government expenditure on education as a percentage of GDP is the measure often employed to gauge the quantity of public resources devoted for the purpose. However a better measure is per student expenditure, for two reasons. First, it does not require an arbitrary base like the GDP. Second, due to the unit of measure it is useful in input-output comparisons. The first section of the paper explain the flow of funds amongst various government department and local bodies, illustrating the challenges that such a federal structure creates for effective accountability. The second sections argues that expenditure as a percentage of GDP is not a good judge of quantity and quality of education, and per student expenditure is of far greater use of public policy purposes. It also provides data on per student expenditure, in state government, Municipal Corporation of Delhi (MCD), and New Delhi Municipal Council (NDMC) schools, from 1998-99 to 2003-04. The gender-wise break-up is also given. The third section focuses on schedules castes, especially the Special Component Plan started by the centre government since the 6th Five Year Plan. The last two sections are on Vocational Education and Non-Formal Education. Vocational education is meant to improve the livelihood opportunities of the poor, and there had been increased expenditure towards this end, however its objectives are ill-conceived. Non-formal education is meant of the poorest of the poor (street children for example), though large amounts were budgeted year after year, little was actually spend. The scheme was finally dropped despite the fact that there are millions of street children in Delhi.

After decades of neglect the HIV/AIDS epidemic has rightly become one of the highest priorities on the global agenda. Funding pledges from the donors have doubled resource commitments between 2002 and 2004 to over $6 billion. That surge in funding belies the volatile nature of contributions to HIV/AIDS initiatives at the country level. The paper analyzes the impacts of abrupt HIV/AIDS funding on macroeconomic stability, fiscal health and the development of health institutions. The macroeconomic effects are ambiguous, but depend on the overall level of aid flows, as well as those for HIV/AIDS, the management of foreign exchange inflows, and effective spending policies. The fiscal ramifications revolve around the jump in external funding that reached around 1000% in Lesotho and Swaziland, and 650% in Zambia between 2002 and 2004, and the required rapid scale up if resources are to be used productively. At the same time, the new HIV/AIDS monies are swamping public health budgets in some cases exceeding 150% of the government's total allocations for health. The vertical HIV/AIDS programs and the set aside funding threaten to undermine the very institutions that will need to carry forward the long term HIV/AIDS prevention and treatment agenda for each country. Health systems are already fragile, and governance problems and uneven productivity compound the challenges. Health institutions require funding and attention to strengthen them in the fight against HIV/AIDS. While the committed funds are desperately needed, solutions to the dilemma will require creative options to ensure the flow of funds, manage the economic implications and ensure effective service delivery. These are explored in the concluding section.

Foreign direct investment is in reality a heterogeneous flow of funds, composed of both greenfield-FDI ("greenfield investment") and acquisition-FDI (cross-border mergers and acquisitions). We analyse the choice of FDI mode in an international oligopoly where process R&D decisions are made endogenously and potential entry into the industry is allowed for. Relative to greenfield-FDI, acquisition-FDI is a soft response to the entry threat: in intermediate-sized markets, entry deterrence via greenfield-FDI can make acquisition-FDI unprofitable. The effect of trade liberalisation on acquisition-FDI flows is shown to depend crucially on the R&D technology. Normative analysis shows that equilibria associated with acquisition-FDI generally exhibit higher industry profits but lower consumer surplus than those associated with greenfield-FDI. However, Pareto dominant acquisition-FDI arises in small markets when acquisition prompts R&D investment that would not otherwise occur.

Graham and Harvey (2001) provide survey results suggesting that managers attempt to time interest rates in their debt issuance decisions. Some of their results may be interpreted as forward-looking (i.e., trying to issue before interest rates rise), and some are backward-oriented, suggesting issuance when interest rates are low compared to historical levels. We employ a sample of more than 14,000 new debt issues over the period 1970-2001 and examine both aspects of debt timing. Our results strongly support backward timing, even after eliminating refinancing transactions, but they do not support the ability to time future interest rates. Our results contrast with recent findings by Baker, Greenwood and Wurgler (2003) that are based on Flow of Funds data. Our results account for number of issues, amount issued, debt maturity, and call and put features. We examine future interest rates, term spreads and excess bond returns. We find managers were not successful at forward timing when weighting issuances by proceeds, maturity and proceeds, or the effects of call and put features on effective maturity. In contrast, our results on backward timing strongly support the recent survey evidence on timing. Debt issuance measured by total amount or number of issues is related to the relative level of interest rates in comparison to their historical values. The amount of debt issued and the number of debt issues is strongly related both to the absolute level of interest rates and to their relative historical levels. Firms issue significantly higher amounts of long-term debt when long- term interest rates are low. We control for a variety of other market conditions that could affect issuance. When interest rates decline, refinancing is common. In our sample, refinancing is indeed much more likely when interest rates are at low historical levels. However, the non-refinancing transactions still demonstrate that debt issuance is significantly more common when relative interest rate levels are low. Refinancing transactions do not cause the results. Our results are consistent with the survey results of Graham and Harvey (2001) and Bancel and Mittoo (2004) showing that financial managers seek to issue debt when rates are "particularly low." Our results are not consistent with forward debt timing. Thus, if managers attempt to issue longer-term debt when they anticipate that future interest rates or spreads will rise or excess bond returns will be negative, they appear to be unsuccessful.

This paper presents integrated macroeconomic accounts for the United States for the period 1985 to 2002 and discusses issues related to their construction and use. Specifically, it focuses on tying together the national income and product accounts (NIPAs) and international transaction accounts (ITA) published by the Bureau of Economic Analysis and the flow of funds accounts (FFA) published by the Federal Reserve Board. The paper provides integrated accounts for seven sectors: households and nonprofit organizations serving households, nonfinancial noncorporate businesses, nonfinancial corporate businesses, financial businesses, federal government, state and local governments, and the rest of the world. Each sector table has a full complement of accounts: current accounts (production and income accounts), accumulation accounts (capital account, financial account, and other changes in volume account), revaluation account, and balance sheet account. As a result, the sector statements trace the factors leading to changes in sector net worth. Relative to current publications of the two agencies, the tables go quite a bit further toward providing for the United States the sequence of accounts suggested in the System of National Accounts 1993 (SNA93), the recognized international standard. The tables use official data as of June 10, 2004; however, a few series have been created by the authors, and they are unofficial preliminary estimates at this time.

This paper is a preliminary report on an examination of the decline in the household saving rate over the past two decades from both the macroeconomic and microeconomic perspectives. At the aggregate level, it is noteworthy that about 40 percent of the fall in the household saving rate is within the contractual retirement accounts, and that much of the drop in discretionary saving occurred prior to the sharp rise in equity and home values in the late 1990s. The paper also examines the magnitude of other potential explanations, such as the drop in inflation, capital gains on wealth and an alternative treatment of consumer durables as investment. The microeconomic section explores the feasibility of using information from successive Surveys of Consumer Finances (SCF) to follow the wealth accumulation of specific age cohorts over the period of most dramatic change in the aggregate saving rate. For many components of wealth, the surveys are very similar to the corresponding aggregates of the flow of funds accounts (FFAs), but there are substantial discrepancies for corporate equities. The discrepancies in the nominal wealth are magnified when the two estimates are adjusted for capital gains, yielding substantially different estimates of household saving. The paper reports on some preliminary efforts to benchmark the SCF to the FFAs, using the distributional information of the SCF to provide an added dimension to the FFA data.

In this paper I investigate the make-up of household sector wealth. In particular I look for evidence that there has been a move towards increased equity participation ('equitisation'). I also touch upon the issue of the 'wealth effect', and whether this has led to a significant rebalancing of portfolios. Analysis of the composition of household sector wealth shows that the share of equities has increased dramatically, suggesting that equitisation has been a powerful force in recent years. However, when I investigate where the household sector has actually channelled savings the evidence in favour of the equitisation story is less forceful. Flows to bank deposits (along with investment in life products) remain the most important form of saving. Nevertheless, equity mutual funds (investment and unit trusts, including PEPs and equity-based ISAs) have increased in popularity in recent years. These trends suggest that the equitisation process will be slow and steady, rather than a sudden switch leading, for instance, to rapid bank disintermediation. With regards to the wealth effect, it is probably fair to say that this has had a significant impact on aggregate savings flows. In particular, many employers have taken contribution holidays or reduced contributions in response to pension fund surpluses.

We develop a simple rational model of active portfolio management that provides a natural benchmark against which to evaluate observed relationship between returns and fund flows. Many effects widely regarded as anomalous are consistent with this simple explanation. In the model, investments with active managers do not outperform passive benchmarks because of the competitive market for capital provision, combined with decreasing returns to scale in active portfolio management. Consequently, past performance cannot be used to predict future returns, or to infer the average skill level of active managers. The lack of persistence in actively managed returns does not imply that differential ability across managers is nonexistent or unrewarded, that gathering information about performance is socially wasteful, or that chasing performance is pointless. A strong relationship between past performance and the flow of funds exists in our model: Indeed, this is the market mechanism that ensures that no predictability in performance exists. Choosing parameters to match the flow-performance relationship and survivorship rates, we find these features of the data are consistent with the vast majority (80%) of active managers having at least enough skill to make back their fees.

The analysis is motivated by the observation that foreign direct investment (FDI) is in reality a heterogeneous flow of funds, composed of both greenfield-FDI ('greenfield investment') and acquisition-FDI (cross-border mergers and acquisitions), although previous game-theoretic analyses have concentrated exclusively on one form of FDI. We aim to isolate the determinants of the equilibrium form of FDI. We model the equilibrium industrial structures of a concentrated (two-incumbent) global industry that spans two (perfectly segmented) national product markets (i.e. an 'international oligopoly'). Firms' FDI decisions (i.e. whether to produce abroad and what form of FDI to choose) and process R&D decisions are made endogenously, and potential entry into the industry is allowed for. Key findings are that acquisition-FDI arises in medium-sized markets (where entry does not occur) and that necessary conditions for greenfield-FDI are a large market and a small sunk cost of additional plants. In future work the welfare properties of equilibria associated with the alternative forms of FDI will be compared.

National Accounts (implemented by United Nations) and Flow-of-funds (by International Monetary Fund) developed along different routes until the "third generation" of the System of National Accounts (1968 SNA). Most authors have devoted their attention to the statistical and operational reasons that could explain the quantitative discrepancies between the balances of the real capital formation account and of the financial account. In this paper I will link the technical reasons to the differences in the economic theories that accompanied the implementation of the "first" SNA by Richard Stone (1947) and of the Moneyflows by Morris Copeland (1952).

This paper analyzes the structural relationship between currency and equity markets in ten Far Eastern countries during the recent Asian crisis. This analysis is done separately for returns and for volatilities. Using a new statistical technology for identifying regime shifts, we are able to demonstrate how information shocks in these markets moved from country to country in the 1992-1998 time period. We also create confidence intervals for when the most significant regime shifts occurred in each country. We find that volatility breaks occur prior to return breaks; more specifically, shifts in the volatility structure occurred in fall 1997 for most countries in our sample, while most shifts in the return structure occurred in mid 1998. The sequential nature of the observed regime shifts is consistent with the notion that return and volatility linkages among Asian markets were created by information spillover effects. Our study also shows that the negative relationship between volatility and returns found by French, Schwert and Stambaugh (1987) for the U.S. market holds for Asian markets. Furthermore, our results indicate that the information shocks in this crisis are related more to equity market movements, in particular, capital flight, than to foreign exchange shocks. An analysis of flow of funds data provides further evidence that information spillover or herding effects generate the observed return and volatility relationships among these countries.

Assessing investment activity is a key to understanding the present Russian economy; the Russian official national accounts, however, do not give very much information on it because of their large statistical discrepancies. Using a matrix balancing method, we construct an aggregated Social Accounting Matrix (SAM), which integrates a Russian Flow of Funds table into the Russian national accounts and contains no discrepancies. Comparing the Russian SAM with Japanese and U.S. SAMs, we find some characteristics of the Russian economy such as: a large current deficit in the non-financial corporation sector, different tax burdens for the institutional sectors, a low level of financial intermediation, and wage arrears as a kind of forced saving.