Monetary Policy Report submitted to the Congress on February 27, 2008, pursuant to section 2B of the Federal Reserve Act
Figure of financing gap and net equity retirement at nonfinancial corporations, 1992-2007. Data are plotted as two curves. The financing gap starts at around $20 billion in 1992 and remains fairly steady through 1996. It then begins rising fairly steadily, reaching $310 billion in 2000. Through 2001 and 2002, the financing gap declines sharply, reaching about $20 billion in 2002 and remains fairly steady through 2004. It then drops again in 2005 to around -$110 billion and then rises again over the next two years, reaching nearly $250 billion in 2007. Net equity retirement starts at around -$30 billion in 1992 and remains fairly steady through 1996, when it begins to rise over the next years, reaching around $215 billion in 1998. It declines fairly steadily, reaching about $42 billion in 2001 and then begins to increase sharply, reaching nearly $840 billion in 2007.
Note: The data are annual; the observations for 2007 are based on partially estimated data. The financing gap is the difference between capital expenditures and internally generated funds, adjusted for inventory valuation. Net equity retirement is the difference between equity retired through share repurchases, domestic cash-financed mergers, or foreign takeovers of U.S. firms and equity issued by domestic companies in public or private markets. Equity issuance includes funds invested by private equity partnerships and stock option proceeds.
Source: Federal Reserve Board, flow of funds data.