Transcript Balance of Payments

Balance of Payments
Why should International
Businesspeople pay attention to the
Balance of Payments Statistics?
Balance of Payments
1. BOP statistics help identify emerging
markets for goods and services.
2. They can warn of possible new policies
that may alter a nation’s business
climate.
3. They can indicate a reduction in a
nation’s foreign reserves.
4. They can indicate an increase in risk to
lending to particular nations.
Major Components of the
BOP Accounting System
1. Current Account
2. Capital Account
3. Official Reserves
4. Errors and Omissions
Current Account
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Exports and Imports of goods
Exports and Imports of services
Investment Income
Gifts
Key to whether it’s an export or an import;
what is the direction of the flow of money?
Money flows in = export. Money flows out =
import.
Capital Account
• Records the purchases and
sales of assets between
residents of different
countries.
•Foreign Direct Investment (FDI)
•Portfolio Investments
Official Reserves
• Gold
• Convertible Securities
Errors and Omissions
• Records the purchases and
sales of assets between
residents of different
countries.
How will the BOP be affected?
• An American entrepreneur seeking to sell souvenirs at the 2004
Olympics in Athens pays Olympic Airlines, a Greek airline,
$1,400 for a New York–Athens round-trip ticket.
• That entrepreneur instead pays United Airlines (an American
airline) $1,400 for a New York-Athens round-trip ticket.
• Ford Motor Company (U.S) pays $2.5 billion for the Jaguar
Motor Company (U.K.).
• The U.S. government gives Rwanda $500 million worth of food
to feed starving refugees.
Additional Resources
• http://www.digitaleconomist.com/bop_4
020.html
• http://www.investopedia.com/articles/03
/060403.asp
• http://www.econlib.org/library/Enc/Bala
nceofPayments.html
• http://en.wikipedia.org/wiki/Balance_of_
payments