1 / 12

International Economics By Robert J. Carbaugh 7th Edition

International Economics By Robert J. Carbaugh 7th Edition. Chapter 11: The balance of payments. The Balance of Payments. Balance of Payments. A record of international transactions between residents of one country and the rest of the world

alliec
Download Presentation

International Economics By Robert J. Carbaugh 7th Edition

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. International EconomicsBy Robert J. Carbaugh7th Edition Chapter 11: The balance of payments

  2. The Balance of Payments Balance of Payments • A record of international transactions between residents of one country and the rest of the world • International transactions include exchanges of goods, services or assets • “Residents” means businesses, individuals and government agencies, including citizens temporarily living abroad but excluding local subsidiaries of foreign corporations Carbaugh, Chap. 11

  3. The Balance of Payments Double-entry accounting in the BOP • All transactions are either debit or credit transactions • Credit transactions result in receipt of payment from abroad • Merchandise exports • Transportation and travel receipts • Income received from investments abroad • Gifts received from foreign residents • Aid received from foreign governments • Local investments by overseas residents Carbaugh, Chap. 11

  4. The Balance of Payments Double-entry accounting(cont’d) • Debit transactions lead to payments to foreigners • Merchandise imports • Transportation and travel expenditures • Income paid on investments of foreigners • Gifts to foreign residents • Aid given by home government • Overseas investments by home country residents • Each credit transaction has a balancing debit transaction, and vice versa, so the overall balance of payments is always in balance Carbaugh, Chap. 11

  5. Structure of the Balance of Payments Current account • Goods and services balance • Merchandise trade balance • Services balance • Investment income • Unilateral transfers • Private transfer payments • Governmental transfers Carbaugh, Chap. 11

  6. Structure of the Balance of Payments Capital account • All purchases or sales of assets, including: • Direct investment • Securities (debt) • Bank claims and liabilities • Official settlements transactions Carbaugh, Chap. 11

  7. Current account Current account surplus and deficit • Current account and capital account balance each other; when one is in surplus the other must be in deficit • Current account surplus means exports of goods and services, investment income and transfers exceed imports and outflows • Current account deficit means imports of goods and services, and outflows are greater than exports and inflows; must be financed by borrowing (capital account inflows) Carbaugh, Chap. 11

  8. Balance of Payments US Balance of Payments, 1997 ($ bill.) Current account Merchandise trade exports $678.3 imports -877.2 Net -198.9 Services military trans. (net) 3.8 other services, net 81.5 All services, net 85.3 Balance on goods & services -113.6 Investment income, net -14.3 Cont’d. Carbaugh, Chap. 11

  9. Balance of Payments US Balance of Payments, 1997 ($ bill.) Current account (cont’d) Unilateral transfers US government grants -11.6 US govt pensions, and other transfers -4.2 Private remittances and other transfers -22.8 All transfers, net -38.6 Balance on current account $-166.5 Carbaugh, Chap. 11

  10. Balance of Payments US Balance of Payments, 1997 ($ bill.) Capital account Changes in US assets abroad, net US official reserve assets -1.0 other US govt assets 0.2 US private assets -426.1 All changes, net -426.9 Changes in foreign assets in the US, net foreign official assets 18.2 foreign private assets 672.3 All changes, net 690.5 Allocation of SDRs 0 Statistical discrepancy -97.1 Balance on capital account 166.5 Carbaugh, Chap. 11

  11. Balance of Payments US Balance of Payments 1970-97 ($ bill.) Carbaugh, Chap. 11

  12. Balance of Payments Balance of international indebtedness • Summarizes one nation’s overall quantity of assets and liabilities against the rest of the world • Shows whether the nation is a net debtor or a net creditor • Indicates sensitive items, such as short term debt held by foreigners which could be liquidated quickly, straining finances Carbaugh, Chap. 11

More Related