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    Balance of Payment

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    CHAN KWOK KING G9G-01
    The document summarizes key components of a country's balance of payments accounts, including the current account, capital account, and financial account. The current account tracks trade balances and international transfers. The capital account covers asset transactions and debt forgiveness. The financial account includes foreign direct investment, portfolio investment, and reserve assets. Real-world accounts include an "errors and omissions" item to balance debits and credits. As an example, the US had a $212 billion current account deficit and $326 billion net financial outflows in Q1 2023.

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    Balance of Payment

    Uploaded by

    CHAN KWOK KING G9G-01
    8 views1 page
    The document summarizes key components of a country's balance of payments accounts, including the current account, capital account, and financial account. The current account tracks trade balances and international transfers. The capital account covers asset transactions and debt forgiveness. The financial account includes foreign direct investment, portfolio investment, and reserve assets. Real-world accounts include an "errors and omissions" item to balance debits and credits. As an example, the US had a $212 billion current account deficit and $326 billion net financial outflows in Q1 2023.

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    The document summarizes key components of a country's balance of payments accounts, including the current account, capital account, and financial account. The current account tracks trade balances and international transfers. The capital account covers asset transactions and debt forgiveness. The financial account includes foreign direct investment, portfolio investment, and reserve assets. Real-world accounts include an "errors and omissions" item to balance debits and credits. As an example, the US had a $212 billion current account deficit and $326 billion net financial outflows in Q1 2023.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    8 views1 page

    Balance of Payment

    Uploaded by

    CHAN KWOK KING G9G-01
    The document summarizes key components of a country's balance of payments accounts, including the current account, capital account, and financial account. The current account tracks trade balances and international transfers. The capital account covers asset transactions and debt forgiveness. The financial account includes foreign direct investment, portfolio investment, and reserve assets. Real-world accounts include an "errors and omissions" item to balance debits and credits. As an example, the US had a $212 billion current account deficit and $326 billion net financial outflows in Q1 2023.

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    BALANCE OF

    PAYMENTS
    BALANCE OF TRADE IN GOODS AND CURRENT TRANSFERS
    SERVICES
    ACCOUNT

    Inflows due to transfer from abroad like


    CURRENT

    Difference between the value of gifts, remittances, eg:


    exported and imported goods/services Foreign aid, gifts, etc.
    (Exports - Imports), similar to “net
    exports”

    INCOME BALANCE ON CURRENT ACCOUNT


    All inflows of rents, interest, profits from The sum of all the items in current
    abroad; minus all outflows of rents, account
    interests, and profits
    When there is a negative value: Current
    account deficit, indicating there is an
    excess supply of the currency in the
    foreign exchange market

    ACCOUNT
    CAPITAL
    CAPITAL TRANSFERS TRANSACTIONS IN NON-PRODUCED,
    Inflows minus outflows as debt NON-FINANCIAL ASSETS
    forgiveness, canceling the debt Purchase or use of natural resources that
    have not been produced
    E.g. Non-life insurance claims,
    investment grants E.g. Mineral rights, water, fishing rights
    FINANCIAL

    FOREIGN DIRECT INVESTMENT (FDI) RESERVE ASSETS (OFFICIAL RESERVE)


    ACCOUNT

    Includes investments in productive Refers to foreign currency reserves that


    facilities - physical capitals (buildings & the central bank can buy or sell to
    factories) undertaken by multinational influence the value of the country’s
    corporations. currency

    Inflows (direct investment by foreigners)


    PORTFOLIO INVESTMENT
    minus outflow (local investment abroad)
    Includes investments in financial capital
    such as stocks and bonds
    OFFICIAL BORROWING
    Refers to the government borrowing Inflows (direct investment by foreigners)
    from abroad minus outflow (local investment abroad)
    OMISSIONS

    In the real world --


    ERRORS

    it is difficult to record every single transaction between a country and all


    other countries, and some of these transactons go unrecorded.
    AND

    HOWEVER, since the sum of all credits must equal the sum of all debits, it is
    necessary for actual accounts to include an item creating this equality.

    THEREFORE, the real world balance of payment accounts include an item


    called “errors and omission” to ceate an equality between the sum of credits
    and the sum of debits. It is simple a statistical “trick” that does not affect the
    analysis of balance of payments, and so for simplicity is not included

    REAL WORLD EXAMPLE - US


    CAPITAL ACCOUNT CURRENT ACCOUNT FINANCIAL ACCOUNT
    -2.749 USD BN IN JUN -212.1 USD BN IN JUN NET FINANCIAL-ACCOUNT
    2023. THIS RECORDS AN 2023, COMPARED WITH A TRANSACTIONS WERE −
    INCREASE FROM THE DEFICIT OF 214.5 USD BN $326.8 USD BN IN THE
    PREVIOUS NUMBER OF IN THE PREVIOUS QUARTER FIRST QUARTER (2023)
    -5.913 USD BN FOR MAR (2023)
    2023.

    IMPORTS
    CARS ($139B)
    CRUDE PETROLEUM ($120B)
    COMPUTERS ($102B)
    BROADCASTING EQUIPMENT ($101B)
    PACKAGED MEDICAMENTS ($86.3B)

    EXPORTS
    REFINED PETROLEUM ($83.3B)
    PETROLEUM GAS ($70.9B)
    CRUDE PETROLEUM ($67.6B)
    CARS ($55.4B)
    INTEGRATED CIRCUITS ($51.3B)

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