TERM PROJECT - ORGANIZED FINANCE (FLOW OF FUND)

TERM PROJECT - ORGANIZED FINANCE (FLOW OF FUND) - ANIZED...

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Unformatted text preview: ANIZED FINANCE W OF FUNDS) Sapan Panchal Monika Pat el PROFESSOR - KHORSAND University of Nor ther n Virginia FI NA - 510 I D:-110-00-3260, 110-00-3261 5/17/2011 ancial flows; poverty-reducing economic growth L IST I NTRODUCTION T HE P RINCIPLE O F F LOW O F F UNDS T HE F LOW O F F UND M ODEL A ND T HE E VOLUTION O F F INANCIAL M ARKET T HE S OLUTION O F F LOW O F F UNDS M ODELS : A SSETS D EMANDS A ND A SSET P RICES F LOW O F F UNDS A NALYSIS F OR D EVELOPING C OUNTRIES C ONCLUSIONS A ND P RIs O RGANIZED F INANCE ( F LOW O F F UNDS) I NTRODUCTION Flow of funds analysis provides a general framework for studying a wide range of issues concerning the financial sector and its relationships with the real economy. It has been widely used in the industrial economies as a basic information tool, in general empirical research, and for detailed financial policy analysis. However, relatively little flow of funds work has been done for developing countries, notwithstanding its potential importance in studying the process of financial sector development (e.g. the evolution of financial institutions and markets) in order to identify effective financial sector policies for promoting poverty-reducing economic growth. This paper conducts a selective survey of the leading theoretical and empirical issues surrounding flow of funds analysis, focusing in particular on its use in financial modeling and as a tool of analysis of intersectoral financial flows. The idea is to analyze the key relationships between the financial and real sectors of the economy and the role of the financial sector in the development process. T HE P RINCIPLE O F F LOW O F F UNDS Flows of funds arise from the transactions which take place in an economy whether involving purchases or sales of goods and services or exchanges of assets and liabilities. These transactions generate flows of funds from one agent to another and from one sector to another. National flow of funds accounts provide a record of these flows for the whole economy; the accounts covering individual or corporate transactions are more usually called sources-uses statements. Virtually all macroeconomic models call for the use of some part of the flow of funds. However, the expression "flow of funds models" has a more specific meaning, referring to a general approach to modeling and understanding the flow of funds as a whole, and its role in interest rate determination . Copeland (1952) is generally regarded as the pioneer of flow of funds analysis. He showed how comprehensive "money flows" accounts could be compiled and flow of funds analysis....
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TERM PROJECT - ORGANIZED FINANCE (FLOW OF FUND) - ANIZED...

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