Search

We show that mutual funds worldwide provide substantial international exposure through their domestic holdings of multinationals. The international exposure of domestic funds increases, on average, by 32 percentage points when we consider international corporate diversification. We find that funds with higher indirect international exposure perform better in both the cross-section and the time series. This effect is primarily driven by the fund managers' ability to invest in multinationals, rather than the performance of those multinationals. Our findings support the hypothesis that international diversification from multinationals reduces the transaction and information costs of investing abroad. Authors have furnished an Internet Appendix , which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

Summary: This paper studies spillovers across macroeconomic sectors in the United Kingdom, using data from the Bank of England's Flow of Funds statistics. We combine two different approaches to quantify the spread of economic deterioration to assess whether sectors with large bilateral economic linkages as measured through network data have a greater statistical likelihood of spillovers between them. The combination of both approaches reveals the Monetary Financial Institutions sector's role as shock absorber and identifies the most important channels of spillovers. The inferential discrepancies between network data and statistical spillovers highlight the contribution of the proposed methodology. [ABSTRACT FROM AUTHOR]

South Africa dreams of eradicating poverty and achieving equitable distribution of its scarce resources among its citizens by 2030. Economic growth sustained over time is crucial in achieving its developmental goals. Domestic savings provide a cheap source of resources for investment that would sustain economic growth. This study explored the relationship between South Africa's aggregate national savings and aggregate national income from 1987 to 2021. The study utilized Solow's bivariate model and error correction-centered causality to ensure the robustness of the study results while testing the relationship between saving and economic growth. The study confirmed that aggregate national saving was positively related to South Africa's economic growth. In the short run, deviations from the long-run paths were partly corrected in the present period. In addition, the study found aggregate national saving Granger caused short- and long-term economic growth. The general policy recommendation is that the Government of South Africa should remove bottlenecks to aggregate national saving mobilization efforts by implementing pro-saving fiscal and monetary policies. High saving rates will stimulate income growth through investments in productive sectors, reducing poverty and inequality. [ABSTRACT FROM AUTHOR]

We present a comparative study of flows between institutional sectors in the economies of Czechia, Hungary, Poland and Slovakia, with particular emphasis on the role of the foreign sector. The purpose of our study is to determine the strength and nature of inter‑sectoral ties in the analyzed countries and point out the similarities and differences between them. The research method is based on the sequence of all transactions included in the System of National Accounts (SNA): product transactions, primary income generation and allocation, income distribution, and financial instrument transactions. The study is distinguished by its consistency and balance within the SNA. The method used to transform data into a payer‑payee matrix guarantees the preservation of these properties. It creates a new perspective for assessing the sensitivity of economies to external processes. It is the first such comprehensive comparative study, providing unambiguous and replicable results based on a standardized accounting system that operates in all European countries. The period covered by the study (2000–2020) allows us to draw interesting conclusions about the processes that took place during and after the accession to the European Union. The results indicate, inter alia, an increase in the involvement of the foreign sector, primarily in production processes (import, export) and investment. Particularly noteworthy is the high degree of financialization of the Hungarian economy.

Copyright of Comparative Economic Research is the property of Wydawnictwo Uniwersytetu Lodzkiego and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We construct a new measure of trading regularity, capturing the extent to which investors trade on a regular basis. Institutional investors that regularly trade outperform those that trade less regularly. The performance of funds that regularly trade persists for at least a year. Among those who trade most regularly, larger funds perform relatively worse, because they incur higher transaction costs associated with their larger trades. Institutions that regularly trade generate superior performance, in part, by behaving as contrarians and by trading more aggressively on information. By contrast, we find no relation between trading regularity and performance among index funds. Received November 21, 2016; editorial decision March 28, 2018 by Editor Andrew Karolyi. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online. [ABSTRACT FROM AUTHOR]

This paper develops a discrete‐time epidemiological model to characterize the spread of economic deterioration across sectors in the United States for the period 1952–2015. It is the first model to apply an epidemiological approach to consider such spread using macroeconomic Flow of Funds data. By extending the usual one‐period Markov model to a two‐period setting, we incorporate the possibility that an initial slow growth period may either continue further or improve such that further economic deterioration is averted. The estimated model can be used to classify more versus less contagious sectors and identify their channels of transmission. [ABSTRACT FROM AUTHOR]

The excessive increase in transport intensity is one of the negative impacts on the economy. The costs borne due to transport activities are indirectly expressed by the volume of carriages (in tons) and by the scope of transport activity (in ton-kilometers). The result of social and economic activities are global product values and national incomes. This article shows the research on transport activity expressed through transport activity (in ton-kilometers) for all means of transport in total, the results of social and economic activities expressed using the gross domestic product, as well as shaping transport intensity of national economies in selected European countries. The analysis of the course of the exponential function curves, as well as polynomial curves has been carried out, and conclusions have been formulated on their bases. [ABSTRACT FROM AUTHOR]

Financial Accounts are fundamental to monitor financial stability by quantifying the impact of financial decisions of a host of economic agents. In Portugal, the compilation of these statistics is a responsibility of Banco de Portugal. One of the main purposes of the Statistics Department of Banco de Portugal is to ensure this statistical production with high quality standards, aiming at fully meeting user’s needs, by developing a wide set of quality control procedures. In this context, Banco de Portugal developed a multidisciplinary team with experts from financial accounts and from the different underlying primary statistics. Within this format, that can be viewed as a “boomerang effect”, all team members are co-responsible for producing national financial accounts, on a bottom-up approach, thus improving both the quality of these statistics, as well as the quality of primary statistics. This is the result of a systematic iterative process of data cross-check and reconciliation which may represent an opportunity to validate the soundness of microdata, on a top-down approach.

Research background: Savings of households are accumulated as a result of individual propensity to save. Simultaneously, they provide the sources of financing investments in the economy through financial institutions as intermediaries in the flow of funds, between entities with a surplus and those with a demand for them. Purpose of the article: The paper aims at indicating the changes in the structure of house-holds’ financial savings in Poland in the period 2003–2015, as well as at exploring them as a source of financing the activities of other sectors through institutional mechanisms of the financial system. Methods: Intersectoral financial flows were estimated using input-output methods for com-piling “sector by instrument” tables of financial assets and liabilities into “sector by sector” matrices of intersectoral flows of each financial instrument. The research is based on statistical data published in the Eurostat database, i.e. annual accounts — financial balance sheets by institutional sectors and subsectors. The role of households’ financial savings in the network of intersectoral linkages in the financial system has been examined on the basis of financial input-output model. Findings & Value added: The comparison of the significance of particular institutional sectors’ supply of funds clearly indicates that the increase in households’ financial assets causes the largest increase in financial flows both as a result of direct effect and indirect effects reflecting the size of these flows’ feedback in the financial system. The study presented herein is the first application of the input-output approach for the Polish financial system. The idea of financial input-output model proposed by Tsujimura & Mizoshita (2003) is extended to disaggregate intersectoral flows in the form of individual financial instruments.

The article focuses on the work of François Perroux, one of the most creative and prominent French economists of the twentieth century. It mentions that he produced studies throughout his life on subjects as different as corporatism, national accounts, planning, the dynamics of the disparities and inequalities among nations. It also mentions the field of national income and planning became an essential part of his third-way perspectives.

We present a simple rational model to highlight the effect of investors' participation costs on the response of mutual fund flows to past fund performance. By incorporating participation costs into a model in which investors learn about managers' ability from past returns, we show that mutual funds with lower participation costs have a higher flow sensitivity to medium performance and a lower flow sensitivity to high performance than their higher-cost peers. Using various fund characteristics as proxies for the reduction in participation costs, we provide empirical evidence supporting the model's implications for the asymmetric flow-performance relationship. [ABSTRACT FROM AUTHOR]

The paper presents a simple theory of intraday behavior in the interbank market. The timing of borrowing and lending operations depends on the information available on two key variables: the end-of-day balance from the clearing system--the algebraic sum of incoming (+) and outgoing (-) daily payments--and the short-term interest rate. When the former is the relevant source of uncertainty, risk-averse banks should tend to operate close to the end of the business day, when the balance becomes observable. Conversely, when the interbank rate is relatively more volatile, operations should be shifted to the early morning, when the balance is not observable but the rate is. The theory is found to be consistent with banks' behavior in the Italian interbank market. [ABSTRACT FROM AUTHOR]

This paper observes effect of money supply on the stock market through the portfolio balance channel as a transmission mechanism of monetary policy. National flow of funds accounts, specifically assets from US households’ portfolios, represent a key data source. Johansen’s cointegration methodology is employed in the empirical part of the paper to analyze both short term and long term relationships among researched variables. Estimates of vector error correction model help to reliably quantify intensity of the effect. Results show money supply excercises influence on valuation of S&P 500 index with 6 months lag. The impact is also distinguishable in the long run, whereas all observed asset classes can positively influence price of S&P 500. Findings are then contextualized in the concluding part of the paper using a monetary policy framework.

This paper studies the flows of funds into and out of equity mutual funds. Consumers base their fund purchase decisions on prior performance information, but do so asymmetrically, investing disproportionately more in funds that performed very well the prior period. Search costs seem to be an important determinant of fund flows. High performance appears to be most salient for funds that exert higher marketing effort, as measured by higher fees. Flows are directly related to the size of the fund's complex as well as the current media attention received by the fund, which lower consumers' search costs. [ABSTRACT FROM AUTHOR]

We analyze a large microlevel dataset on the full daily portfolio holdings and exposures of 22 complex investment funds to shed light on the behavior of professional investment fund managers. We introduce a set of quantitative attributes that capture essential distinctive features of manager allocation strategies and behaviors. These characteristics include turnover, attitude toward hedging, portfolio concentration, and reaction to external events, such as changes in market conditions and flows of funds. We find the existence and stability of three main investment attitude profiles: conservative, reactive, and proactive. The conservative profile shows low turnover and resilience against external shocks; the reactive one is more prone to respond to market condition changes; and members of the proactive profile frequently adjust their portfolio allocations, but their behavior is less affected by market conditions. We find that exogenous shocks temporarily alter this configuration, but communities return to their original state once these external shocks have been absorbed and their effects vanish. [ABSTRACT FROM AUTHOR]

Financial Accounts are fundamental to monitor financial stability by quantifying the impact of financial decisions of a host of economic agents. In Portugal, the compilation of these statistics is a responsibility of Banco de Portugal. One of the main purposes of the Statistics Department of Banco de Portugal is to ensure this statistical production with high quality standards, aiming at fully meeting user's needs, by developing a wide set of quality control procedures. In this context, Banco de Portugal developed a multidisciplinary team with experts from financial accounts and from the different underlying primary statistics. Within this format, that can be viewed as a "boomerang effect", all team members are co-responsible for producing national financial accounts, on a bottom-up approach, thus improving both the quality of these statistics, as well as the quality of primary statistics. This is the result of a systematic iterative process of data cross-check and reconciliation which may represent an opportunity to validate the soundness of microdata, on a top-down approach. [ABSTRACT FROM AUTHOR]

We use the case of the 2007 United States subprime mortgage crisis to investigate the impact of borrowing capacity limitations 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 time derivatives of its wealth, cash inflows, and borrowing capacity. We show that among these factors, the borrowing capacity, which is determined by other economic constraints, has the largest impact on financial instability. It is suggested that borrowing capacity limitations could 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 2017 to verify our conjecture by quantifying the financial instability levels of the agents under different levels of borrowing capacity and how they affect one another during the period of the subprime mortgage crisis. Finally, the constraints of data collecting practice outside the United States in assessing borrowing capacity is addressed, accompanied by partial, yet compatible, results of selected Eurozone countries. [ABSTRACT FROM AUTHOR]

The article examines the household allocation of income to financial and real expenditures in the United States. The paper "Pitfalls in Financial Model Building," by William Brainard and James Tobin, is looked at for its use of a multivariate stock-adjustment model to determine portfolio adjustment. The author uses an extended version of this model to study U.S. household allocation of income to financial and real expenditures. The implications of allocation to expenditure decisions are discussed. The importance of wealth constraints for asset demand is looked at.

The article discusses flow-of-funds equations at the level of household financial management. The linear expenditure system (LES) model is used here as a method for working around difficulties in using empirical research to investigate household spending and income. It is found that LES can be found using expected utility function on the condition that the gamma distribution is linked to the rate of return. The article concludes that the LES model, the cros-section analysis, and the time-series analysis were able to yield accurate estimates of the economic aspects of households.

The article uses a flow-of-funds model and a bank-reserves model to examine interest rate behavior. In the first model supply and demand in the security market determines interest rates whereas in the second rates are devised through the equilibrium of bank reserves and reduced-form relations. The two identities of the flow-of-funds model are that that each area must be able to pay for its own spending and issues-equal-purchases have been used to uncover the model's security yields. The article concludes that the bank reserve model underestimated the increase in interest rates that occurred between 1967 and 1970. The flow-of-funds model overestimated the commercial paper rate during 1972.

Econometric model building of the type represented in the Duesenberry-Bosworth paper was at best an attempt to see whether systems of, say more than 25 equations, add much to our knowledge of the economy and the response to policy changes. They have not, I believe, at least to this point, and I am not optimistic about a change in the next few years, instead of commenting on the details of the particular models presented at this session, I will explain some of the reasoning that brings me to that conclusion. Before doing so, let me make clear that my comments are not directed at either "theory" or empirical science. There is very little of either in current econometric practice. I view my comments as a criticism of large models, models of twenty-five or more equations, not as a criticism of modelling or testing economic hypotheses. [ABSTRACT FROM AUTHOR]

A financial system in a modern market economy has two basic functions: the facilitation of transactions among economic units, and the allocation of savings among alternative investments and investors. The former has been associated with money as a medium of exchange and with the short-term money markets, and the latter with the capital markets. Traditional monetary theory emphasized the transactions function in focusing upon the demand and supply of money as the primary analytical framework for examining the role of financial variables in the economic system. The basis for this point of view was the classical quantity theory of the monetary mechanism. Money as a medium of exchange was given heavy emphasis in a theory which specified a rigid relationship between total transactions and the demand for money balances--a relationship which could not be altered by other factors endogenous to the economic system. Under these circumstances, any change in the supply of money balances was fully reflected in a proportionate change in the demand for nominal output. There was little interest in, or need to refer to, the market for other financial assets. The present model differs in that it is concerned with the demand and supply of bonds rather than the demand and supply of money balances. This allows us to undertake a degree of disaggregation by asset and sector that is not feasible within the framework of the market for money balances, Such a model is theoretically and empirically equivalent to the "money models" unless there are significant departures from the hypothesis underlying the homogenization of different types of marketable securities. Specifically, it is our view that observed differences in the cyclical movement of market interest rates are affected by the relative quantities of the individual securities outstanding. [ABSTRACT FROM AUTHOR]

This article focuses on the fiscal management in cities and municipalities in the U.S. Fiscal strain may be thought of as the offering price of a new bond market issue, or the price in the secondary bond market. Both of these are related to the probability of the issue meeting regular payments of principal and interest. Topics also discussed include the stress on the municipal bond market, causes of municipal fiscal strain, flow of funds, and a chart depicting factor analysis of fiscal strain indicators.

This paper argues that an aggregate preferred habitat for investors exists on (or about) the last day of the calendar month, due to standardizations in the nation's payments system resulting in a concentrated flow of funds on this date. Thus, equilibrium yield discounts are predicted for securities maturing on such dates. Empirical tests on monthly and daily Treasury bill data support the principal hypothesis, as well as several ancillary hypotheses. The results have implications for Treasury debt management, for the short-term cash and debt management practices of businesses and banks, and for the empirical estimation of daily, weekly, or monthly return premiums on risky securities. [ABSTRACT FROM AUTHOR]

To evaluate the potential economic significance of the FMS auctions, one must first determine how the placement opportunities provided by the auctions may be used by mortgage lenders. In this endeavor, the clearest case of the entrepreneur among the various mortgage lenders is the non-depository financial intermediary, the mortgage banking firm (MBF). Since its entire operation is oriented to mortgage finance, the MBF provides an excellent example of a mortgage lender attempting to efficiently utilize the FMS auctions. In this paper, the operations of this financial intermediary are analyzed and a bid model for use in the FMS auctions is developed. [ABSTRACT FROM AUTHOR]

The article reports on the flow and sources of funds. Interest rates can relate to sources or flow of funds systems through the use of residual funds which were supplied by individuals, foreigners, and various investors. However, this is not the only manner flow of funds systems can be applied to an analysis of interest rates. The sectoral demand for cash balances is directly related to the banking system and can be starved, adequate, or satiated depending on the status of the banking system. Also, interest rates are related to the estimate of the volume of funds supplied by investors, foreigners, or individuals.

The article discusses the use of flow-of-funds data in making future financial flow short run projections. The flow of funds accounts is the only application which recognizes the nature of accounts as a closed economic system in macroanalysis. A closed economic system is one where all transactions are covered as payments and as receipts. Macroforms of analysis are appealing because they recognize the interrelations of parts of the whole explicitly even though they do not predict financial activity consistently or accurately.

The article reports on the application of the flow of funds accounts to interest rate forecasting. There has not been a lot of interest in techniques for forecasting interest rates because they are considered results of business activity and therefore need only business forecasts. However, there are two popular methods: correlations with the economy based on a non-statistical approach, and an outlook analysis of the uses of funds and their sources. An informal approach considers that money rates are reflective of changes in business activity which create fluctuations in interest rates that are comparable.

The article reports on the flow of funds which was created by the economist M. A. Copeland. Statistics in the capital market were being disgorged by the U.S. Board of Governors of the Federal Reserve System after the revised presentation in 1959. The flow of funds accounts is used to analyze the financial market but when an economist is not a specialist in the capital market he really does not find it useful. The fact that not all economists can use this system shows that there is an unbalanced growth.

The article discusses the flows of funds between reserve districts or zones in the U.S. as of 1955. The article examines the theory of international trade as a balancing mechanism under an international gold standard. The author explains that net interregional flows of funds within the U.S.usually come in the form of shifts in member bank reserves. The article also discusses the patterns of flows of funds, analytical uses of the interregional moneyflows data, and interregional flows and bank reserves. Several tables are presented to help illustrate the study.

The article focuses on the flow of funds through the capital market. This progress report spans from 1953 to 1955. Particular attention is given to the quarterly flow of funds through the market. The first part of this study discusses the nature and some of the problems of measuring quarterly flows. The second part examines some of the developments in the capital market suggested by the data on these flows. The article explains how this set of accounts differs from the Federal Reserve Board's flow-of-funds accounts.

The article surveys the development of flow-of-funds methodology for analyzing borrowing problems confronted by the U.S. Treasury Department. Research into the subject was prompted by the substantial financing needs of World War II. By early 1942 individuals from various government agencies were exploring the relationships between savings, investment, consumption, and other key variables. Older metrics such as "national income" were found lacking, and new measures were created. It was seen that, for certain purposes, gross income flow was a more appropriate statistic than gross national product. From gross income flow came disequilibrium analysis. Since World War II, flow-of-funds methods have continued to be used, albeit in streamlined form.