The Role of Financial Accounts Data in Financial Stability Analysis: The Case of Lithuania

Abstract

The significant transformation of financial markets, institutions and infrastructures over the last few decades has substantially enhanced the role of finance in the economy. In a number of cases the increase in financial assets and/or liabilities was several times faster than the growth rate of gross domestic product (GDP)- Along with the evident advantages of this financial deepening, however, a number of disadvantages emerged as well. Notably, during economic, financial or other types of crises, the financial burden built up earlier greatly aggravates the position of indebted economic agents, resulting in slower output growth. This has, in turn, fuelled discussions on financial stability issues in both a local and a global context. Taking into account its complexity, safeguarding financial stability has become a challenge, raising questions in every step taken. The rising interconnectedness between different sectors and economies has made the necessary analysis as a first step of maintaining financial stability - even more complicated. Demand for comprehensive and consistent data sources which could be of help in assessing interconnectedness has increased. While financial accounts (or flow-of-funds) data could play an important role here, only a few countries in the European Union publish so-called who-to-whom (interconnectedness) data.