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Flow of funds: implications for research on financial sector development and the real economy

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  • Christopher J. Green

    (Department of Economics, Loughborough University, Loughborough, UK)

  • Victor Murinde

Abstract

This paper provides a selective survey of the leading theoretical and empirical issues surrounding the flow of funds: its meaning and origin, problems of construction, its use in financial modelling and its role as a tool of analysis of intersectoral financial flows. It is argued that there is an intimate connection between the flow of funds, interest rates and asset prices, and hence incomes and expenditures in an economy. The paper discusses flow of funds analysis in the context of developing countries, concentrating on possible applications and methodologies, and the issue of data collection and organization. We explore the reasons for lack of success at empirical flow of funds modelling and propose 'promising research ideas' (PRIs) to apply flow of funds analysis to study the relationship between financial sector development and the real economy, particularly to identify effective financial sector policies in developing countries. Copyright © 2003 John Wiley & Sons, Ltd.

Suggested Citation

  • Christopher J. Green & Victor Murinde, 2003. "Flow of funds: implications for research on financial sector development and the real economy," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(8), pages 1015-1036.
    • Handle: RePEc:wly:jintdv:v:15:y:2003:i:8:p:1015-1036
    DOI: 10.1002/jid.961
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    Cited by:

    1. Moore, Tomoe & Green, Christopher J. & Murinde, Victor, 2006. "Financial sector reforms and stochastic policy simulations: A flow of funds model for India," Journal of Policy Modeling, Elsevier, vol. 28(3), pages 319-333, April.
    2. Zeph Nhleko, 2010. "Handling systems challenges from the compilation of flow of funds - the case of South Africa," IFC Bulletins chapters, in: Bank for International Settlements (ed.), The IFC's contribution to the 57th ISI Session, Durban, August 2009, volume 33, pages 434-440, Bank for International Settlements.
    3. Ni Zhan, 2021. "Where does the Stimulus go? Deep Generative Model for Commercial Banking Deposits," Papers 2101.09230, arXiv.org.
    4. Barend de Beer & Nonhlanhla Nhlapo & Zeph Nhleko, 2010. "A perspective on the South African flow of funds compilation - theory and analysis," IFC Bulletins chapters, in: Bank for International Settlements (ed.), The IFC's contribution to the 57th ISI Session, Durban, August 2009, volume 33, pages 239-248, Bank for International Settlements.
    5. Bashar Al-Zu'bi & Victor Murinde, 2011. "Household portfolio behaviour: evidence from Middle East economies," Applied Financial Economics, Taylor & Francis Journals, vol. 21(17), pages 1281-1289.
    6. Apostu Simona-Andreea, 2018. "Statistical and econometric analysis of the correlation between financial transactions and real economy," Proceedings of the International Conference on Business Excellence, Sciendo, vol. 12(1), pages 70-79, May.
    7. Tomoe Moore & Christopher Green & Victor Murinde, 2005. "Portfolio Behaviour in a Flow of Funds Model for the Household Sector in India," Journal of Development Studies, Taylor & Francis Journals, vol. 41(4), pages 675-702.

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