Intersectoral Financial Flows in Developing Countries

This paper is about financial flows in developing countries. It reviews the evidence on who the borrowers and lenders are. Apart from collecting and summarizing available data from some seventeen countries, the paper presents the results of an econometric analysis of the interactions between the net lending behaviour of the different sectors. The paper is organized as follows. Section 2 clarifies some terms and in particular explains what a complete set of flow of funds accounts looks like. Section 3 provides an analytical framework for the consideration of flow of funds data. Section 4 reports the main data on sectoral surpluses and deficits and summarizes the empirical findings on their mutual interaction and on their determinants. Section 5 describes the typical pattern in developing countries of financial flows by instrument. A summary and conclusion is presented in section 6.