As explained above, we assume that a share α of each type of financial sector asset translates into liabilities for the financial sector. The share α is estimated as follows: let l
f and L
be the liabilities of instrument i held, respectively, by the financial sector and all sectors combined. The share α of each instrument i is simply l
. α’s are calculated for each year.
Table A3 shows the FoF code for each series used to calculate the baseline α shares (i.e., those that include the Federal Reserve).Footnote 11 For instance, the α for open market paper is calculated as:
In order to remove the Federal Reserve from checkable deposits and currency, we calculate a separate α for Federal Reserve liabilities. This α equals
The amount of intra-financial assets of checkable deposits and currency were thus calculated as
In the case of net inter-bank transactions and federal funds and repurchase agreements it was possible to identify and therefore directly subtract Federal Reserve assets and liabilities from financial sector asset stocks and lending flows in both instrument categories. This is necessary in order to avoid counting lending by the Federal Reserve as well as lending to the Federal Reserve. For net interbank transactions, we subtract Federal Reserve assets in this category (FL714010005), which include floats and loans to domestic banks; and also subtract Federal Reserve liabilities (FL714110005), which include depository institutions’ reserves and vault cash. For federal fund and repurchase agreements, we subtract the Federal Reserve’s reverse repurchase agreements (FL712150003) from total financial sector assets (Table A4).
Table A5 presents the underlying series used for the calculation of intra-financial assets and lending for each instrument category. For instance, the total assets of the instrument category agency and GSE-backed securities is calculated as the sum of these instruments held by the sub-sector series including US-chartered depositary institutions (FA763061705), mutual funds (FA653061703), issuers of asset-backed securities (FA673061705), and so on. Detailed descriptions of each series are available in the FoF online guide (http://www.federalreserve.gov/apps/fof/) by searching for the appropriate series code.
It is worth mentioning one aspect of how the instrument categories are organized. In cases when types of instruments have been securitized, the broad instrument categories include both the underlying class of asset as well as the securitized product.Footnote 12 For instance, the other loans and advances category includes both collateralized loan obligations and the underlying business loans these are based on. Similarly, the agency and GSE-backed securities category includes both the original mortgage pools as well as the resulting mortgage- backed securities. In these instances we take care to only count the instrument sub-categories that result in intra-financial claims and not those that evidently represent claims on other sectors, for example, households or non-financial business (Tables A6 and A7).