CFSP workshop advances role of flow of funds in developing countries

Accounts could represent major enhancement to understanding developing economies, financial systems
May 23, 2012

In April 2012, CFSP hosted a second workshop designed to foster the creation and use of what are now less common but important data sets for low- and middle-income countries: flow of funds accounts.

The “Flow of Funds Accounts and Savings” workshop assesses and promotes the status of flow of funds accounting in developing countries. Flow of funds accounting is important because it allows the mapping of primary financial relationships within a country’s financial systems, accounting for households, firms, and government flows. Without this mapping, it is difficult to determine how low-wealth households save, interact with, and are affected by financial systems.

The meeting, which brought more than 25 practitioners from around the globe to the MIT campus, advanced the understanding of the potential for the use of flow of funds accounting in developing countries. It was the second meeting of its kind.

“The object we are focused on is measurement through the flow of funds accounts,” noted Robert M. Townsend, MIT economist and CFSP faculty director, in his opening comments to the conference.

“What we’re doing is trying to understand what data is out there, how we can put these flow of funds accounts together, what the variables mean, and how we can improve upon them. Joining theory and models to this process is also a big part of what we want to talk about during this workshop.”

One promise, suggests Townsend, of establishing wider use of flow of funds, is that they provide a key measurement of how financial systems work. The data can then be used to identify those sectors or obstacles that could be improved from a financial design standpoint for the widespread benefit of the population.

Slides from key presentations, the agenda, and more information about this workshop can be found at the "Flow of Funds Accounts and Savings" homepage.

Photo: Raúl Enrique Hernández Coss, Comision Nacional Bancaria y de Valores (CNBV) of Mexico, shares a comment at the Flow of Funds workshop.