A Flow-of-Funds Perspective on the Financial Crisis Volume II: Macroeconomic Imbalances and Risks to Financial Stability (Palgrave Macmillan Studies in Economics and Banking)

Based on the crisis experience, the book offers an overview of lessons for macrofinancial analysis and financial stability. It illustrates the interlinkages between the financial side and the real side of the economy and highlights the role of balance sheet variables and sectoral balance sheet positions in the evolution of the financial crisis. 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 and to identify macroeconomic imbalances that could undermine financial stability. This publication takes a flow-of-funds perspective of the financial crisis. The book illustrates the broad range of interlinkages between the financial side and the real side of the economy and highlights the role of balance sheet variables and sectoral balance sheet positions in the evolution of the financial crisis, covering the United States, the Eurozone, the United Kingdom, Japan and Slovenia. The authors also reflect on the use of financial data in the context of diagnosing and addressing excessive macroeconomic imbalances in Europe and on the use of financial accounts to underpin the analysis of systemic risks in the financial system. In this respect, the flow of funds offers a framework for looking at the right kind of questions when policy-makers consider how to prevent, manage and resolve financial crises Front Matter....Pages i-xx Introduction and Overview....Pages 1-8 Front Matter....Pages 9-9 Tobin LIVES: Integrating Evolving Credit Market Architecture into Flow-of-Funds Based Macro-Models....Pages 11-39 Growing Fragilities? Balance Sheets in The Great Moderation....Pages 40-109 Japan’s Flow-of-Funds Accounts: Main Characteristics and Measures for Enhancement....Pages 110-127 Conceptual Framework of Financial Accounts: The Case of Slovenia....Pages 128-151 Front Matter....Pages 153-153 The Financial Crisis in the Light of the Euro Area Accounts: Selected Issues....Pages 155-198 The Surveillance of Macroeconomic Imbalances in the EU: The Sectoral Perspective....Pages 199-229 Debt, Assets and Imbalances in the Euro Area: An Aggregate View....Pages 230-259 Front Matter....Pages 261-261 Towards a Systemic Risk Indicator Based on Contingent Claim Analysis....Pages 263-285 The Role of Financial Accounts Data in Financial Stability Analysis: The Case of Lithuania....Pages 286-304 Analysis of the Sectoral Financial Interlinkages of the Financial Sector in Austria against the Background of the Recent Financial Crisis....Pages 305-326 Back Matter....Pages 327-336