Chapter 8

Balance Of Payments
Balance of Payments Accounting

The Balance of Payments is the statistical record of a countrys international transactions over a certain period of time presented in the form of double-entry bookkeeping.
Balance of Payments Accounts

The balance of payments accounts are those that record all transactions between the residents of a country and residents of all foreign nations. They are composed of the following:
The Current Account The Capital Account The Official Reserves Account Statistical Discrepancy
The Current Account

Includes all imports and exports of goods and services. Includes unilateral transfers of foreign aid. If the debits exceed the credits, then a country is running a trade deficit. If the credits exceed the debits, then a country is running a trade surplus.
Balance Of Payments: Current Account

The balance of payments accounts divide exports and imports into three categories:
Merchandise trade
Exports or imports of goods.
Services
Payments for legal assistance, tourists expenditures, and shipping fees.
Income
International interest and dividend payments and the earnings of domestically owned firms operating abroad.
It also includes unilateral current transfers (like gifts and foreign aids).
The Capital Account

The capital account measures the difference between sales of assets to foreigners and purchases of foreign assets. The capital account is composed of Foreign Direct Investment (FDI), Portfolio Investments and other investments.
Balance Of Payments: Capital Account

These international asset movements differ from those recorded in the financial account. For the most part they result from nonmarket activities, or represent the acquisition or disposal of non-produced, nonfinancial, and possibly intangible assets (such as copyrights and trademarks). Examples:
If U.S. government forgives $1 billion in debt owed to it by Pakistan, U.S. wealth declines by $1 billion, or the $1 billion is recorded as debt in U.S. capital account. If wealthy British citizen immigrates to U.S. and brings along $5billion in British asset, result would be a $5 billion credit in U.S. capital account.
Statistical Discrepancy
Theres going to be some omissions and misrecorded transactionsto get things to balance.
The Official Reserves Account
Official reserves assets include gold, foreign currencies, SDRs, reserve positions in the IMF.
The Balance of Payments Identity

BCA + BKA + BRA = 0
where BCA = balance on current account BKA = balance on capital account BRA = balance on the reserves account
Under a pure flexible exchange rate regime, BCA + BKA = 0
Balance of Payments Data

Credits Current Account 1 2 3 Exports Imports Unilateral Transfers Balance on Current Account Direct Investment Portfolio Investment Other Investments Balance on Capital Account Statistical Discrepancies Overall Balance $10.24 $1,418.64 ($1,809.18) ($64.39) ($444.69) $287.68 $474.39 $262.64 $444.26 0.73 $0.30 ($0.30) ($152.44) ($124.94) ($303.27) Debits
Capital Account 4 5 6 7
Official Reserve Account

In 2000, the U.S. imported more than it exported, thus running a current account deficit of $444.69 billion.

During the same year, the U.S. attracted net investment of $444.26 billionclearly the rest of the world found the U.S. to be a good place to invest.

Under a pure flexible exchange rate regime, these numbers would balance each other out.

In the real world, there is a statistical discrepancy.

Including that, the balance of payments identity should hold: BCA + BKA = BRA
($444.69) + $444.26 + $0.73 = $0.30= ($0.30)
Balance of Payments and the Exchange Rate

Exchange rate $ P S
D Q

Exchange rate $ P S
D Q
As U.S. citizens import, they are supply dollars to the FOREX market.

Exchange rate $ P S
D Q
As U.S. citizens export, others demand dollars at the FOREX market.

Exchange rate $ P S
D Q

Exchange rate $ P S S1
D Q
As the U.S. government sells dollars, the supply of dollars increases.

Exchange rate $ P S
D Q
Balance Of Payments
Case Study: Is the United States the Worlds Biggest Debtor?
The United States had a negative net foreign wealth position far greater than that of any other single country. The United States is the worlds biggest debtor. However, the United States has the worlds largest GNP.
Exchange Rates and Trade

When individuals, businesses and governments in one country want to trade, borrow or lend in another country, they must convert their currency into the other country currency for the transaction. Exchange rates are important because they enable us to translate different counties prices into comparable terms. Exchange rates are determined in the same way as other asset prices i.e. supply and demand.
Exchange Rates
An exchange rate can be quoted in two ways:
Direct:
The price of the foreign currency in terms of domestic currency. Example: $0.01 per yen.
Indirect:
The price of domestic currency in terms of the foreign currency. Example: 0.68 euro per dollar.
Exchange Rates
Nominal exchange rate or the exchange rate is the price of one countrys currency in terms of another countrys currency.
Example: Japans yen per U.S. dollar, Indias rupees per euro.
When a U.S. consumer wants to buy a Japanese camera it has two parts:
Price of camera in yen. Price of yen in dollars.
If camera is worth 25,000 yen and yen is worth $0.01, then dollar price for camera is $250.
Exchange Rates
Two types of changes in exchange rates: Depreciation of home countrys currency
A rise in the home currency prices of a foreign currency. It makes home goods cheaper for foreigners and foreign goods more expensive for domestic residents.
Appreciation of home countrys currency

A fall in the home price of a foreign currency. It makes home goods more expensive for foreigners and foreign goods cheaper for domestic residents.
Indias Case
1991 Financial Crisis 1996-98 South East Asian Crisis Current Account and Capital Account. Full Convertibility and Partial Convertibity Pegging of Indian Rupee with Pound and US Dollar. FII and FDI in India. Indias Foreign Exchange Reserve. Fixed, Flexible and Managed Exchange Rates.

Chapter 8

Загружено:

Сведения о документе

Исходное описание:

Авторское право

Доступные форматы

Поделиться этим документом

Поделиться или встроить документ

Параметры публикации

Этот документ был вам полезен?

Это неприемлемый материал?

Авторское право:

Доступные форматы

Chapter 8

Загружено:

Авторское право:

Доступные форматы

Balance Of Payments

Balance of Payments Accounting

Balance of Payments Accounts

The Current Account

Balance Of Payments: Current Account

The Capital Account

Balance Of Payments: Capital Account

The Official Reserves Account

The Balance of Payments Identity

Under a pure flexible exchange rate regime, BCA + BKA = 0

Balance of Payments Data

Official Reserve Account

Balance of Payments Data

Official Reserve Account

Balance of Payments Data

Official Reserve Account

Balance of Payments Data

Official Reserve Account

Balance of Payments Data

In the real world, there is a statistical discrepancy.

Official Reserve Account

Balance of Payments Data

Official Reserve Account

($444.69) + $444.26 + $0.73 = $0.30= ($0.30)

Balance of Payments and the Exchange Rate

Official Reserve Account

Balance of Payments and the Exchange Rate

Official Reserve Account

Balance of Payments and the Exchange Rate

Official Reserve Account

As U.S. citizens export, others demand dollars at the FOREX market.

Balance of Payments and the Exchange Rate

Official Reserve Account

As U.S. citizens export, others demand dollars at the FOREX market.

Balance of Payments and the Exchange Rate

Official Reserve Account

As the U.S. government sells dollars, the supply of dollars increases.

Balance of Payments and the Exchange Rate

Official Reserve Account

As U.S. citizens export, others demand dollars at the FOREX market.

Exchange Rates and Trade

Appreciation of home countrys currency

Вам также может понравиться