Technical Report Flow-of-funds analysis in the Brazilian economy (2004–2014)

Burkowski, Erika  ,  Kim, Jiyoung

6962018-03 , Institute of Developing Economies (IDE-JETRO)
This paper is applies the flow-of-funds (FOF) framework proposed by Tsujimura and Mizoshita (2004) to investigate the structure 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 rest of world, financial firms and the Central Bank of Brazil) for the years 2004 to 2014. From the Brazilian ALM, FOF indexes 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 presents an ALM with four additional financial firms: three government-sponsored banks—Banco do Brasil, Caixa Econômica 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 highlighted 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.

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