Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–1 Chapter 10 The balance of payments
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–2 The balance of payments (BOP) Record of the value of all the economic transactions between – residents of one country (e.g. individuals, firms, governments) and – residents of all other countries during a given time period.
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–3 The balance of payments (BOP) cont. Double-entry bookkeeping system For nations with floating currencies, the entire balance of payments by definition must numerically balance, while individual accounts or subaccounts may not balance.
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–4 The standard IMF presentation Current account Capital and financial account
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–5 Current account International transactions involving goods and/or services, income and current transfers. Main items: 1. Goods and services (a) goods (5 items) (b) services (11 items) 2. Income (a) compensation of employees (b) investment income (e.g. FDI profits, other) 3. Current transfers (payments in cash and kind by residents to non-residents)
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–6 Capital and financial account The country's transactions in monetary and ownership claims. 1. Capital account (a) capital transfers (e.g. involving transfers of ownership of fixed assets); general government and other (b) acquisition/disposal of non-produced, non-financial assets (e.g. intangibles, such as patented entities, leases, goodwill)
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–7 Capital and financial account cont. 2. Financial account (a) direct investment (b) portfolio investment (c) other investment (e.g. trade credits, loans, currency and deposits, other) (d) reserve assets Net errors and omissions
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–8 Imports of goods Item/ Commodity Debit (B$ million) Credit (B$ million) 1–A1 Goods10.0 Oil imports 2–B3b Other investment 10.0 Decreases in S-T foreign assets held by residents Source: Exercise 1, p.243
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–9 Imports of services Item/ Commodity Debit (B$ million ) Credit (B$ million) 1–A21 Transportation services 1.0 Payments for freight services 2–B3b Other S-T investment 1.0 Decrease in S-T foreign assets held by residents Source: Exercise 2, p.243
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–10 Investment income Item No/NameDebit (B$ million) Credit (B$ million) 1–B2 Investment income 4.0 Profits of FDI in Bucksland 2–B1 Direct investment 2.0 Increased investment in Bucksland enterprises 2–B3b Other S- T investment 2.0 Decreases in S-T domestic liabilities Source: Exercise 3, p.243
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–11 Current transfers Item/ Commodity Debit (B$ million) Credit (B$ million) 1–C1 Current transfers 0.5 Payment in kind to non- residents 1–A1 Goods0.5 Food exports Source: Exercise 4, p.244
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–12 Direct investment Item No/ Name Debit (B$ million) Credit (B$ million) 2–B1 Direct investment 14.0 Increased investment in foreign enterprises 1–A1 Goods 7.0 Exports to non- resident destinations 2–B3b Other S-T investment 7.0 Decreases in S-T foreign assets held by residents Source: Exercise 5, p.244
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–13 Other investment Item/ Commodity Debit (B$ million) Credit (B$ million) 2–B3a Other investment (L-T) 9.0 L-T loans by non-residents to residents 2–B 3b Other investment (S-T) 9.0 Increases in S-T foreign assets held by residents Source: Exercise 6, p.244
Copyright 2006 McGraw-Hill Australia Pty Ltd. PPTs t/a International Trade and Investment: An Asia-Pacific Perspective 2e by Gionea. Slides prepared by John Gionea.. 10–14 Bucksland’s BOP balances Debit (B$ million) Credit (B$ million) 1–A Goods and services Balance on G & S –B Income 4 Balance on G&S & income –C Current Transfers 0.5 Current Account Balance (1A + 1B + 1C) CAD = B$8.0 m. Source: adapted from Table 10.2