Flow of Funds (FOF)

Flow of Funds (FOF): Definition, Purpose, and Key Data

What are Flow of Funds (FOF) accounts?

Flow of Funds (FOF) accounts are national financial accounts that track net money movements among sectors of an economy. They record how funds flow between households, businesses, government, nonprofit organizations, farms, and the foreign sector, capturing changes in assets and liabilities over time.

FOF should not be confused with “fund flows,” which typically refers to asset movements into and out of investment funds (e.g., mutual funds, ETFs).

How FOF accounts are compiled

• FOF accounts use double-entry bookkeeping: every change in an asset is mirrored by a corresponding change in a liability or another asset.
• They cover a broad set of financial instruments, including Treasury securities, bank deposits, money market funds, pension assets, corporate equities and bonds, mutual fund shares, mortgages, and consumer credit.
• In the United States, the Federal Reserve compiles and publishes FOF data in the “Z.1 Financial Accounts of the United States” report, released on a trailing quarterly basis (roughly 10 weeks after quarter-end). Annual series extend back to the mid-1940s, with quarterly records available from the early 1950s.

What the data show

FOF reports provide:
– Assets and liabilities by sector at period end.
– Sources and uses of funds for each sector.
– Time series of outstanding debt and net worth by sector and asset type.
– Derivations of national net wealth and the distribution of gross domestic product (GDP).
– Detailed flows that reveal how capital moves between sectors and across borders.

Uses and importance

• Economic monitoring: FOF data offer a comprehensive, granular view of financial interconnections and balance-sheet positions across the economy.
• Forecasting: Changes in borrowing, saving, and asset allocation can signal shifts in economic activity and help anticipate GDP trends.
• Policy formation: Central banks and fiscal authorities use FOF information to assess systemic risk, design monetary and fiscal responses, and evaluate the likely transmission of policy.
• Research and risk analysis: Academics, analysts, and financial institutions rely on FOF series to study leverage, financial stability, and sectoral vulnerabilities.

Key takeaways

• FOF accounts map the movement of funds among sectors and financial instruments across an economy.
• They combine balance-sheet and flow information to reveal sources and uses of funds, shifts in debt, and changes in net worth.
• Central banks (e.g., the U.S. Federal Reserve’s Z.1 report) publish FOF data regularly, and these series are valuable for economic analysis, forecasting, and policymaking.