Page 90 - Invited Paper Session (IPS) - Volume 2

IPS184 Ivette F. et al.
This paper focuses on disseminating the methodology and measurement
of the FWTW and explaining the content and scope of this information. The
presentation of the results is accompanied by a networking visualization tool,
which allows the examination of interrelationships using charts that
summarize the information contained in the matrices for outstanding amounts
in the main FWTW matrices.

2. Methodology
In the measurement of NA-IS, the FWTW matrices or flows of funds are
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implicitly generated and they are a tool in the balancing of the financial
accounts. These matrices are a three-dimensional representation of the
financial account defining the two parties to the transaction —the debtor and
the creditor— and the financial instrument involved. This information allows
to identify the financial relationships between institutional sectors, and thus it
improves the understanding of the role of financial flows in the economy.
In general, information from different sources, especially financial
statements, is transformed into concepts of national accounts and grouped by
institutional sector and in the different transactions that make up the
integrated framework of national accounts (current account, accumulation
account, financial account, and financial balances sheets).
In particular, financial flows (financial account) are disaggregated into
financial instruments, and in a large number of cases a counterparty of each
transaction can be defined. From these items, it is possible to identify “who” is
awarded a financial instrument, and “who” is providing this instrument, being
the counterparty. For example, the mortgage loans granted by the banks
correspond to information from the Banks sector, from the loans instrument
and the counterparty is Households.
Once the financial accounts have been compiled by institutional sectors,
an inter-sectoral balancing process begins with the aim of ensuring
consistency throughout the system. In the balancing process, for each
instrument an arbitration process is performed based on rules associated with
the hierarchy of information sources, generating the FWTW matrices:
A. Currency: Considers the liabilities side of the Central Bank and the Rest
of the World, and the data are reconciled with the financial information
of the commercial banks and other sectors to measure the assets of
the Households.
B. Deposits: Include liabilities of the Central Bank, commercial banks, and
the Rest of the World; savings accounts are allocated as a household
asset, while the remaining instruments in this category are determined

In varied literature, the term flow of funds is interchangeable with financial account. In this
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paper these shall be differentiated, as in the System of National Accounts.
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