1. Why and how are the capital and current account tied together so closely? In the balance of payment, current account and capital account are tied together by an accounting identity. Current account on one side and the capital and financial accounts on the other side should balance each other out due to the double entry of each transaction. [ Current Account + Financial Account + Capital account + Official Reserve Account = 0 ] For example, if a country has a positive capital and financial
Words: 1611 - Pages: 7
Problem Set 1 (Chapter 12-13) Instructor: Kanda Naknoi September 14, 2005 1. (2 points) Is it possible for a country to have a current account deficit at the same time and has a surplus in its balance of payments? Explain your answer using hypothetical figures. ANSWER: (1 point) Yes. The balance of payments (BoP) is the sum of current account (CA), capital account (KA) and financial account (FA). Theoretically, because of the double-entry bookkeeping practice, the sum is supposed to be zero. BoP =
Words: 1815 - Pages: 8
1. Take a look at Mexico’s balance of payments over the past few years. Use the schedule I have attached – it is in the same format as we used to examine the U.S. balance of payments. What do the trade and current account balances suggest about the likelihood of a potential devaluation of the peso? Why? 2. What does the private capital account suggest about the need for a devaluation of the peso? Why? 3. What does the private transactions balance suggest about the valuation of the
Words: 613 - Pages: 3
News Release 27 April 2012 Jamaica Balance of Payments[1] December 2011 December 2011 Provisional data indicate that the current account deficit widened by US$116.4 million in December 2011, relative to the deficit in December 2010 (see Table). This deterioration largely reflected a widening of the deficit on the goods sub-account mainly due to an increase of US$69.7 million in imports. In particular, there were respective expansions of 89.6 per cent (US$55.2 million)
Words: 1213 - Pages: 5
Balance of Trade shows the difference between the total amount of incoming and outgoing currencies through import and export. Balance of Payment (BOP) is a summary of economic activities between the residents of country and the rest of the world during a given period, usually one year. The main purpose of keeping these records is to inform government authorities about the overall international economic position of the country in order to assist them in arriving at decisions on monetary and fiscal
Words: 505 - Pages: 3
1. BOP (Balance Of Payment) In economics, the balance of payments, (or BOP) measures the payments that flow between any individual country and all other countries. It is used to summarize all international economic transactions for that country during a specific time period, usually a year. The BOP is determined by the country's exports and imports of goods, services, and financial capital, as well as financial transfers. It reflects all payments and liabilities to foreigners (debits) and all
Words: 10426 - Pages: 42
Chapter 35 – International Finance The Balance of Payments The balance of payments is a periodic statement (usually annual) of the money value of all transactions between residents of one country and the residents of all other countries (pg 740). It provides information on: * A nation’s imports and exports. * Domestic residents’ on assets located abroad. * Foreign earnings on domestic assets. * Gifts to and from foreign countries (including foreign aid). * Exchange of assets
Words: 1870 - Pages: 8
1. Introduction The exchange rate volatility and its impact on the volume of international trade has been studied Intensively during 1970’s when the world economy shifted from fixed exchange rate to free floating Exchange rate. The hypotheses may be that if the exchange rate volatility is higher than it will generate Uncertainty of the future profit from export trade. To diminish the uncertainty investors can go for Currency hedge and minimize the uncertainty related to international trade
Words: 5364 - Pages: 22
------------------------------------------------- Balance of payments From Wikipedia, the free encyclopedia Balance of payments (BoP) accounts are an accounting record of all monetary transactions between a country and the rest of the world.[1] These transactions include payments for the country's exports and imports of goods, services, financial capital, and financial transfers. The BOP accounts summarize international transactions for a specific period, usually a year, and are prepared in a
Words: 6686 - Pages: 27
ternational Monetary Fund (Imf) Introduction The IMF is an intergovernmental institution established by an international treaty in 1945 to create a framework for international economic cooperation focusing on balance of payment problems and the stability of currencies. IMF headquarters is in Washington D.C, U.S.A History / establishment of IMF: IMF was founded on 27th December, 1945. During the closing years of world war second, different countries realized that there must be a common
Words: 292 - Pages: 2
