FINANCIAL FLOWS IN RECENT BUSINESS CYCLES.

Publication in 1955 by the Federal Reserve of a national system of annual flow of funds accounts provided a much needed framework for study of interrelations between transactions in financial instruments and transactions in goods and services. In 1959 these accounts were published on a quarterly basis and in 1962 on a seasonally adjusted quarterly basis. Since large intra-year movements are not uncommon in financial flows, elimination of seasonal influences makes for much closer correspondence of financial data to the principal measures of economic activity. It is now possible, for the first time, to systematically analyze recent cyclical patterns in the volume and direction of financial flows. The figures summarized in this paper deal only with changes in the direction and volume of financial (as opposed to non-financial) flows, and cover only the three most recent business cycles--1953-1957, 1957-1960 and 1960-1962. As such, they have possible significance for areas of macro-analysis which recently have been receiving particular attention: the adjustment of various sectors of the economy toward desired positions of net worth, forms of assets held, and volume and types of liabilities assumed; shifts in the origin of pressures and sources of ease in financial markets over the business cycle; and therefore changing financial pressures in the form of interest rate movements as business conditions advance and recede. The purpose here is to see if there is some cyclical regularity with respect to financial assets acquired, assumption of liabilities, and net contribution to or drawing on financial markets by the major sectors of the economy. The relation between changes in financial and non-financial transactions, however, is not examined. In this sense, then, the following material is only a fragment of business cycle analysis. [ABSTRACT FROM AUTHOR]