Flow-of-Funds Analysis in the Brazilian Economy (2004–2014)

Discussion Papers

No.696

by Erika Burkowski and Jiyoung Kim

March 2018

ABSTRACT

This paper applies the flow-of-funds (FOF) framework proposed by Tsujimura and Mizoshita (2004) to investigate the structu re of financial system in the Brazilian economy. The study presents the compilation process of the asset–liability matrix (ALM) and then develops an ALM with six institutional sectors (households, non-financial firms, government, the res t of world, financial firms and the Central Bank of Brazil) for the years 2004 to 2014. From the Brazilian ALM, FOF in dexes are calculated (the power of dispersion, the sensitivity of dispersion and the discrepancy of dispersion). For selected years, the structural decomposition of change in the discrepancy index is calculated and an additional expansion present s an ALM with four additional financial firms: three government-sponsored banks—Banco do Brasil, Caixa Econô mica Federal, and Banco Nacional de Desenvolvimento Econômico e Social—and one private bank—Itaú. The role of each institutional sector in the Brazilian financial system is illustrated and the discrepancy of dispersion is highli ghted with a good indicator of economic problems showing that the origin of recessions in Brazilian economy was almost in the structure of the financial system.

Keywords:  flow-of-funds, financial crisis, Brazilian economy, asset–liability matrix, input-output

JEL classification: C67, D53, G20, N26, O16

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