BALANCE OF PAYMENT Balance of payments (BOP) accounts are an accounting record of all monetary transactions between a country and the rest of the world. It is mainly difference between import and export of country.
SURPLUS AND DEFICITITEMS Sources of funds for a nation, such as exports or the receipts of loans and investments, are recorded as positive or surplus items. Uses of funds, such as for imports or to invest in foreign countries, are recorded as negative or deficit items.
USES OF BOPACCOUNTS Weakness of country and strength as partner in international trade. Reveals the changes in the composition and magnitude of foreign trade. Indication of future repercussion of country’s past trade performance .
KEY TRANSACTION IN BOP1. AUTONOMOUS TRANSACTION2. ACCOMODATING TRANSACTION
TYPES OF ACCOUNT UNDERBOP They are composed of the following: The Current Account The Capital Account The Official Reserves Account Statistical Discrepancy
TYPES OF ACCOUNTS OF BOP A. Current Account A. Net exports/imports goods&services (Balance of Trade)9 B. Net Income (investment income from direct portfolio investment plus employee compensation C. Net transfers (sums sent home by migrant abroad) B. Capital Account Capital transfers related to purchase and sale of fixed assets such as real estate C. Financial Account A. Net foreign direct investment B. Net portfolio investment Basic Balance = A+B+C C. Other financial items D. Net Errors and Omissions Overall Balance = A+B+C+D Missing data such as illegal transfers E. Reserves and Related Items Changes in official monetary reserves including gold and foreign exchange reserves Σ (A:E) = Overall Balance
CAUSES OR KINDS OF BOPDISEQUILIBRUM Cyclical disequilibrium Secular /long term disequilibrium Technological disequilibrium Structural disequilibrium
METHODS TO CORRECTDISEQUILIBUM Trade policy measure Deflation Devaluation