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Palgrave Macmillan

A Flow-of-Funds Perspective on the Financial Crisis Volume I

Money, Credit and Sectoral Balance Sheets

ISBN 9781137352972
Publication Date November 2013
Formats Hardcover Ebook (EPUB) Ebook (PDF) 
Publisher Palgrave Macmillan
Series Banking and the Economy

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

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

Bernhard Winkler is Senior Adviser in the Directorate Monetary Policy at the European Central Bank, responsible, inter alia, for flow-of-funds analysis and the co-ordination of financial projections as part of the quarterly macroeconomic projections exercises. He has published on issues relating to monetary and fiscal policy in a monetary union, monetary policy communication and the Stability and Growth Pact as well as on cross-checking and the flow of funds.

Ad van Riet is Senior Adviser in the Directorate General Economics at the European Central Bank, and Secretary of the ECB Occasional Paper Series. He has published on European money demand, fiscal policy and structural reforms.

Peter Bull joined the European Monetary Institute in Frankfurt as Head of Statistics in 1994, and remained as Director General Statistics when the European Central Bank was established in 1998. After retirement in autumn 2002 he has continued to work on related matters in the ECB and elsewhere. His more recent publications are in the field of national accounts and statistics.

Foreword; Peter Praet
1. Money, Credit and the Flow of Funds in Monetary Policy; Bernhard Winkler, Ad van Riet and Peter Bull
2. The Quantity Theory of Money and the Flow of Funds; Carmelo Salleo
3. The Quantity Theory of Credit and Some of its Policy Implications; Richard Werner
4. Euro Area Money Demand and International Portfolio Allocation; Roberto A. De Santis, Carlo A. Favero and Barbara Roffia
5. Global Liquidity and Credit Booms; Claudio Borio, Robert McCauley and Patrick McGuire
6. Dual Liquidity Crises; Ulrich Bindseil and Adalbert Winkler
7. Determinants and Consequences of Credit Tightening; Riccardo De Bonis, Luigi Infante and Francesco Paternò
8. Financial Intermediary Balance Sheet Management; Tobias Adrian and Hyun Song Shin
9. Bank Leverage and the Credit Cycle in the Euro Area; Celestino Gíron and Silvia Mongelluzzo
10. Households' Financial Portfolio Choices; S. Avouyi Dovi, Vladimir Borgy, Christian Pfister, Michael Scharnagl and Frank Sédillot
11. Household Balance Sheets and Debt; Jacob Isaksen, Paul Lassenius Kramp, Louise Funch Sørensen and Søren Vester Sørensen
12. Analysing Recent Developments in the Financing of Euro Area Non-Financial Corporations; Laurent Maurin
13. Monetary Policy and the Flow of Funds in the Euro Area; Riccardo Bonci

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


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