nep-acc New Economics Papers
on Accounting and Auditing
Issue of 2022‒04‒11
three papers chosen by

  1. A Typology of Captive Financial Institutions in Luxembourg: Lessons from a New Database By Gabriele Di Filippo; Frédéric Pierret
  2. It is not la vie en rose. New insights from Graziani’s theory of monetary circuit By Marco Veronese Passarella
  3. Capital Flows and the Eurozone's North-South Divide By Karsten Kohler

  1. By: Gabriele Di Filippo; Frédéric Pierret
    Abstract: The paper draws a typology of captive financial institutions and money lenders (CFIs, sector S127) in Luxembourg from a new database. The latter retrieves information from three sources: the EuroGroups Register managed by Eurostat, the Statistical Business Register managed by the STATEC (National Institute for Statistics and Economic Studies) and the Central Balance Sheet Register managed by the STATEC. The new database enhances the data coverage of CFIs in Luxembourg. Indeed, it includes not only CFIs with total assets larger or equal to EUR 500 million as in the BCL reporting (BCL (2014)), but also CFIs whose total assets are lower than EUR 500 million. The period of analysis spans 2011 to 2019. Results show that CFIs present different characteristics depending on their balance sheet size. On the one hand, CFIs with total assets larger than EUR 100 million mainly regroup holding companies, intragroup lending corporations, mixed structures and conduits. On the other hand, CFIs with total assets lower than EUR 100 million feature mostly mixed structures. Overall, while holding corporations own the majority of total assets, the largest number of companies consists of mixed structures.
    Keywords: Captive financial institutions and money lenders, Sector S127, Typology, EuroGroups Register, Statistical Business Register, Central Balance Sheet Register, Big Data
    JEL: C80 C81 L22
    Date: 2022–02
  2. By: Marco Veronese Passarella (University of Leeds)
    Abstract: The aim of this paper is twofold. First, it shows how a standard stock-flow consistent model (SFCM) can be modified to embed some fundamental insights from Graziani’s theory of monetary circuit (TMC). Second, it aims at addressing some common mis- conceptions about the TMC. More precisely, it is argued that: a) a market-clearing price mechanism does not necessarily imply a neoclassical-like closure of the model; b) the ways in which SFCMs and the TMC define bank loans are mutually consistent, although they are based on different accounting periods; c) consumer credit is final finance, not initial finance; d) the paradox of profit is not a logical conundrum, but an abstract counterfactual that allows shedding light on a neglected role of government spending; e) overall, the TMC can be regarded as a “Marxian” rendition of Keynes’s method of aggregates.
    Keywords: Theory of Monetary Circuit, Stock-Flow Consistent Models, Macroeconomics, Monetary Economics
    JEL: E11 E12 E16 E17
    Date: 2022–03
  3. By: Karsten Kohler
    Abstract: The paper offers a monetary perspective on the role of capital flows in the Eurozone's north-south divide. It argues that finance-centric narratives in Comparative Political Economy rightly emphasise financial instability in the periphery, but that the role of capital flows therein requires clarification. The paper draws on post-Keynesian monetary theory, coherent accounting, and balance-of-payments data to make three main points. First, the focus on the financial account as a driver of current accounts should be abandoned in favour of an analysis of gross capital flows. Gross flows need not stem from excess savings in core countries and can be independent from trade flows. Second, speculative portfolio flows into bond markets and foreign direct investment into real estate are causally more important than interbank flows in driving financial instability. Third, rising spreads in the periphery during the Eurozone crisis and the outbreak of the pandemic were not triggered by balance-of-payments problems but by a reversal of speculative flows in government bond markets. The argument suggests that Comparative Political Economy should dedicate more attention to institutions that render peripheral countries particularly susceptible to speculative capital flows into asset markets.
    Keywords: Gross capital flows, balance-of-payments, current account imbalances, Eurozone crisis, sudden stop, comparative political economy, post-Keynesian macroeconomics
    JEL: E12 F32 F36 F41 O57
    Date: 2022–03

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