What Exactly Is Flow of Funds (FOF)?
FOF accounts track net money inflows and outflows to and from different sectors of a national economy. Central banks evaluate macroeconomic data from the flow of money accounts. In the U.S., the Federal Reserve Bank releases quarterly statistics ten weeks after the quarter’s conclusion.
Equity and fixed-income mutual funds employ the phrase “fund flows” to describe the number of assets going in and out.
Understanding Funds Account Flow
FOF accounts are mainly used for economy-wide performance. FOF account data may be compared to past data to estimate the economy’s financial health and future. Governments can use the accounts to create monetary and fiscal policies.
Accounts employ double-entry accounting to monitor asset and liability changes across several economic sectors, including households, nonprofits, businesses, farms, government, and foreign entities. Treasury holdings, deposits in the United States from other nations, savings accounts, money market accounts, pension funds, stocks and bonds of companies, shares in mutual funds, mortgages, and consumer loans are all considered.
The annual Fed flow of money data dates to 1945, with quarterly data starting in 1952. The figures show how the U.S. economy has grown and altered since WWII.
The Fed publishes trailing quarterly reports on U.S. financial accounts, including money flow. The Fed’s Z.1 release reveals each sector’s assets and liabilities after the quarter. It also illustrates how each industry raised and spent money. The report covers outstanding debt by sector, net wealth by asset, and GDP distribution. Each account’s detailed disclosures illustrate how net money has moved to or from various sectors, providing a clear view of fund movement inside and outside the economy.
- The flow of cash (FOF) across industries or sectors is accounted for in national financial statements.
- To further economic study, a nation’s central bank compiles and disseminates information on a nation’s cash flow.
- FOF analysis can assess economic activity and predict GDP. They can also inform fiscal and monetary policy.