October 23, 2012

The U.S. financial account is a key component of the Bureau of Economic Analysis’ international transactions accounts (ITAs). The financial account presents the cross-border flows of funds generated by international financial activity. Cross-border flows of funds can be large and volatile because the financial markets are large and because the flows are influenced by changing financial market conditions as well as by changes in financial regulation. The volatile nature of financial flows, particularly on a quarterly basis, can be seen in the accompanying chart.

The financial account records transactions in financial assets such as loans, financial derivatives, and securities between the United States and the rest of the world. For example, if a U.S. company acquires a British company, the increase in U.S. equity investment abroad is recorded as a financial outflow. If a resident of France deposits funds in a U.S. bank by transferring funds on deposit in a French bank, the deposit in the U.S. bank is recorded as a financial inflow.

As the world’s largest economy and a major center of global financial activity, the United States is an attractive market for foreigners looking to acquire new assets. In recent years, transactions in foreign-owned assets in the United States have resulted in more financial inflows to the United States than financial outflows from transactions in U.S.-owned assets abroad. In 2011, financial inflows to the United States were more than $1 trillion while financial outflows were less than half of that, $483.7 billion, for net financial inflows of $556.3 billion.

When financial transactions are combined with current account transactions in goods, services, income, and unilateral transfers, the combination presents a nearly complete picture of all international transactions of the United States. The financial account and the current account are the major components of the ITAs. The ITAs are used to monitor both real and financial developments in the international sector of the U.S. economy.

You can read more detailed information about the financial account here.