In Mankiw "Economics" (Fourth edition) it states when a company exports (UK BP Oil to Japan):

Two things have occured the UK has sold to a foreigner some of its output in the goods market (the oil).....In addition the UK has acquired some foreign assets (the yen), and this increases net capital outflow.

The book then goes on to say specifically "BP" (not the UK) will not hold onto the Yen.

My question is: What happens if the Japanese customer pays in UK pounds (by exchanging at a Japanese bank from the Japanese £ reserves). That must mean that BP never receives the yen. Does this mean there has been no inflow of yen and infact an inflow of pounds. And going by the logic of the book, if an inflow of yen is "BP acquiring foreign assets (from foreign residents)". Then BP acquiring pounds = BP (domestic resident) acquiring domestic assets from foreign residents. Which doesn't fit into the schema of NCO.

Purchase of foreign assets by domestic residents - Purchase of domestic assets by foreigners.

I look forward to you enlightening comments here. They are very much appreciated.


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