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SCHOOL OF BUSINES

Project on:
Balance of Payments

Prepared By: Hassan ajami, Mansour daher, reda younes,ali Mohsen, Mohammad kanso
Submitted To: Dr. habib awada

Course BFIN 430 (International Banking & Finance).

Spring 2013-2014

TABLE OF CONTENTS

1- INTRODUCING THE BOP CONCEPT: 1.1) Brief History 5 1.2) Basic Definition 5 1.3) System of Recording 7 1.3.1) Identifying Transactions 7 1.3.2) The Debit & Credit System 9
2- GENERAL STRUCTURE OF THE BOP: 2.1) Main Components 12 2.1.1) Current Account 12 2.1.2) Trade Balance 15 2.1.3) Capital Account 16 2.1.4) Financial Account 18 2.1.5) Errors & Omissions 22 2.2) Complications 23 2.2.1) Accounts Interrelation 23 2.2.2) Deficit & Surplus Dilemmas 25
3- BOP FROM EQUILIBRIUM TO DISEQUILIBRIUM 3.1) BOP in Equilibrium 27 3.1.1) Equilibrium Conditions 27 3.1.2) Equilibrium Model 27 3.1.3) Types of Equilibrium 29 3.2) BOP in Disequilibrium 29 3.2.1) Causes of Disequilibrium 29 3.2.2) Types of Disequilibrium 32 3.2.3) Consequences of Disequilibrium 33 3.2.4) Measures to Eliminate Disequilibrium 33 3.2.5) Demonstrating Disequilibrium 35

4- STUDYING THE LEBANESE BOP 4.1) Historical Events: 1999 and before 37 4.2) Major Events of the Decade: 2000-2008 38 4.3) Recent Events: 2009-2010 40
5- CONCLUSION Importance of BOP 44

1- INTRODUCING THE BOP CONCEPT

1.1 Brief History

The balance of payments (BOP) basically measures the payments that flow between any individual country and all other countries. Historically these flows simply were not carefully measured, and the flow proceeded in many commodities and currencies without restriction. Clearing (which denotes all activities from the time a commitment is made for