Questions tagged [balance-of-payments]

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1answer
31 views

If the BOP is always equal to 0 then why would a trade imbalance cause currencies to fluctuate?

I am a bit confused in interpreting the correlation between a trade deficit/surplus & currency depreciation/appreciation. Considering BOP always equals 0 and a outflow in the current account is ...
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4answers
135 views

Are there any benefits of moderate devaluation of a currency?

The value of Indian rupee has decreased over the years. The government apparently makes no effort to stop or reverse it. Instead they focus on other aspects of development. Observation 1- I see that ...
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1answer
32 views

Does a high current account deficit ALWAYS have to increase net foreign debt/equity?

My book states a higher CAD necessarily increases net foreign debt/net foreign equity, and I'm a bit confused by this assertion. See, I can understand how a higher current account deficit may ...
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0answers
10 views

Need help with Balance of payments question

Why does a higher CAD mean a nations net external liabilities increase? My book says its due to a higher financial account but i dont understand... wouldnt a higher financial account imply there to be ...
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0answers
13 views

Has the way the balance of payments is recorded changed?

I am trying to understand the balance of payments. My textbooks say, "the internet" also says, all those YT economics videos say (!): BOP = Current account+Capital account+Financial account =...
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0answers
33 views

Can anyone explain why the Swiss balance of payments is not balanced (real data)?

While doing a little research I went to the Swiss National Bank's website and downloaded their data on the Swiss balance of payments. The data is here: https://data.snb.ch/en/topics/aube#!/cube/...
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0answers
21 views

Does a high current account deficit devalue the national currency?

I've been reading some materials about Belarus's 2011 financial crisis, and a common thread among them is this: Belarus had had a rapidly growing current account deficit, and in 2011 it came to a head ...
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0answers
15 views

Where in the BOP does the rental of a building appear?

Say a Japanese citizen (living and working in Japan) owns a house in the US and rents it out (to a US resident) for \$10,000 in 2020. (Assume the value of the land is negligible.) Where in the US BOP ...
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2answers
29 views

Balance of Payment (BPM6) - Direct Investment: how to record

I have a question related to recording in BOP Let say we have two countries: DOMES (domestic country) EXT (external country) a company in EXT invest a new factory in DOMES. I don't know how this ...
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0answers
21 views

Balance of Payments question

I'm trying to look at the balance of payments and whether or not a given entry is a debit or a credit in terms of the money flow. Is there an easy way to tell which it is? We know BOP = CAB + CA +FA + ...
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1answer
52 views

What are some reasons why CEOs make 200-1000x as much as post PhD researchers?

Even the most monetarily effective Post PhD Researchers make at most a couple of million dollars over the course of their careers, whereas CEOs can earn over 1000x more over the course of theirs even ...
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0answers
18 views

Unilateral transfers in the balance of payments

In the secondary income account, unilateral transfers like unconditional foreign aid are recorded but aren't every transaction double-entry to make the balance of payments equal 0. What is the other ...
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0answers
60 views

Gap between BOP and macroeconomic terminologies (In my opinion)

I have not studied BOP well, but as far as i can understand, there is a mismatch between BOP and macroeconomics terminologies. In BOP we say that capital outflow (inflow) occures when finacial account ...
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0answers
26 views

China's balance of payment and balance of trade - relation to inflation

I am struggling with understanding how China's balance of payments (negative, deficit) and balance of trade (positive, profit around 0.5 trln USD) affect it's inflation rate. Obviously, balance of ...
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1answer
27 views

on the FRED website where do i find definitions of the variables they give charts of?

eg M3? how can we see precisely how it is defined, measured? https://fred.stlouisfed.org/series/MABMM301USM189S?fbclid=IwAR1lwaCbKUX16L1meOk6iZvloYOW0F7pIjmq9I4sb5VfvhhLhj8lsVTlpxg
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2answers
389 views

How are trade deficits financed?

The usual answer is either "foreign debt" or "Foreign Direct Investment". But: Why does that make sense? And why wouldn't be financed otherwise like from importers taking out bank loans domestically ...
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1answer
17 views

Sources of data for GDP and BoP accounts

When an American buys a coffee within the US, how does that 3.50 dollars worth of consumption expenditure make it's way to the US GDP account? Is the information obtained from the company's tax ...
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0answers
50 views

Why a Current Account deficit implies a Financial Account surplus [duplicate]

Every macro textbook out there states that if a country has a Current Account deficit, it must have a surplus in the Financial account, but I have not heard a convincing explanation. Imagine a ...
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0answers
16 views

Interpretation of IMF Balance of Payments Data - Financial Account

While I understand the meaning of the components of the Financial account what I don't understand is the concept of "assets" and "liabilities" after direct investment, portfolio investment etc. A ...
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1answer
49 views

What happens if the Central Bank does not absorb a BOP deficit/surplus?

The basic principle of BOP accounting is double entry bookkeeping. In short, every transaction enters twice. As a consequence of this, by definition $$\text{Current account } (CA) + \text{Capital ...
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4answers
69 views

why is it always said that a CAD must be financed by borrowing from foreign countries

a current account deficit (CAD) means you have money leaking out of your country and going to ROW (rest of world). i see here (https://www.imf.org/external/region/tlm/rr/pdf/fpp5.pdf) that it can be '...
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1answer
34 views

Where's a good place to find Information on Non-OCED countries?

I'm looking for Private Savings (Sp), Investment (I), Taxes (T), Government Spending (G) for India.
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1answer
479 views

Balance of payments and the free floating exchange rate system

I am a beginner economics student and recently, I have been learning about how balance of payments surpluses are important for a country to control the value of its currency using its accumulated ...
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0answers
30 views

Devaluation of exchange rate meaning

Pilbeam's textbook on International Finance (p. 106) says: (...) the immediate effect of a devaluation of exchange rate from $S_1$ to $S_2$ is to make domestic good competitive (...) How can be ...
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1answer
21 views

Why FDI stock in the same year is different in the same reports?

From World Investment Report 2003, in 2000, the US has 12.4% GDP as FDI inward stock and 13.2% GDP as FDI outward stock. These numbers are equivalent to 1274720 million USD, and 1356960 million USD. ...
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1answer
36 views

Terms definition in Balance of Payment

I have problems in distinguishing among terms in the Balance of Payment / the international balance sheet of a nation. As far as I know, on Assets and Liabilities sides of BPM, there are Portfolio ...
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0answers
34 views

Is there a quantitative model demonstrating the relationship between balance of payments and exchange rate?

According to conventional analysis, a key factor in exchange rate determination is the state of the balance of payments. An increase in imports gives rise to an increase in a demand for foreign ...
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2answers
112 views

Difference between capital and current account

Why is an increase in foreign assets in a country different from us just selling foreigners our goods? As in why is one (inc. in assets) in capital account and the other (exports) in current account?
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2answers
371 views

How does Russia have so much foreign exchange reserves?

Source Russia is under U.S. sanctions. How does Russia have so much foreign exchange reserves?
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2answers
24 views

Have UK exports (goods and services) to Ireland declined in value since 2011?

Where can I find the relevant Office Of National Statistics data on UK exports to Ireland? I want to know if the value of UK exports to Ireland has declined since 2011 and if so, does anyone know why ...
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1answer
41 views

How to interpret illigal foreign currency (cash) transfers in terms of Balance of payments

There are a lot of examples of legal operations with trade balance and capital flows. Nonetheless, I've failed to find a clear explanations of how to interpret illigal (read, criminal) foreign ...
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1answer
564 views

Balance of Trade - Currency devaluation in a price taker economy

How will a real exchange rate devaluation affect Balance of Trade, if an economy is a price taker in world markets for both export and import?
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0answers
44 views

help understanding the "financing" of the current account

I often hear phrases like country XYZ "finances its current account deficit through flows in its financial account". i have a tough time understanding this idea of "financing" a current account ...
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1answer
85 views

How do currency traders resolve imbalances in the demand for different currencies?

Countries trade different amounts of goods that are inherently imbalanced. How do currency traders resolve these imbalances in the demand for different currencies? For example.... Imagine we have two ...
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2answers
368 views

What's the role for official intervention in the Balance of Payments?

If the Balance of Payments (BP) is defined as $$BP=\text{Current Account}+\text{Capital Account}$$ where: $$\text{Current Account}=X-M+\text{Net Income Interest}$$ and $$\text{Capital Account}=\...