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Understanding Financial Accounts

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Understanding Financial Accounts seeks to show how a range of questions on financial developments can be answered with the framework of financial accounts and balance sheets, by providing non-technical explanations illustrated with practical examples: What are the basic principles, concepts and definitions used for this framework which is part of the system of national accounts? What sources and which methodologies are used for their compilation? How are these used to monitor and analyse economic and financial developments? What can we learn about the 2007-2009 economic and financial crisis when looking at the numbers provided in this framework? What can we learn about financial risks and vulnerabilities? This publication is intended for young statisticians, students, journalists, economists, policy makers and citizens, who want to know more about the statistics that are at the heart of the analysis of financial developments in OECD economies.

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The role of financial corporations in the financial system

Financial corporations are at the centre of the financial system, channelling funds from lenders/savers to borrowers/investors. Although a large part of the funds is channelled through financial corporations, savers can also finance investment directly (for example, households granting loans to an enterprise). Savers may place their funds with a bank in order to benefit from the higher liquidity of a deposit, or purchase investment fund shares as a convenient way to diversify their assets. Even if savers buy securities on the stock market, they typically make use of a security broker or other so called “financial auxiliaries”. This chapter explains the role of the different types of financial corporations in the economy, how they are evolving and how they can be analysed.

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