TheCurrentAccountIncludes all imports and exports of goodsand services.Includes unilateral transfers of foreign aidIf the debits exceed the credits, then acountry is running a trade deficit
The Current Account ❖Includes all imports and exports of goods and services. ❖Includes unilateral transfers of foreign aid. ❖If the debits exceed the credits, then a country is running a trade deficit
BalanceofPayment(1)Current AccountExports and imports of goods and servicesand income receiptsMerchandise trade (tangible goods)Services (invisible trade)FactorincomeUnilateral transfers.puttingup of money; war indemnity;giftsBalance on Current Account (BCA)If thedebits exceed the credits, then a country isrunning a trade deficit
Balance of Payment(1) Current Account Exports and imports of goods and services and income receipts ▪ Merchandise trade (tangible goods) ▪ Services (invisible trade) ▪ Factor income ▪ Unilateral transfers • putting up of money; war indemnity; gifts ❖Balance on Current Account (BCA) If the debits exceed the credits, then a country is running a trade deficit
BalanceofPayment(2)CapitalAccount(asdefinedinthe 1993systemofNationalAccountsandthefiftheditionofIMF'sBOPManual)The new capital account includes unilateral currenttransfers that are really shifts in assets, not currentincome.E.g.debtforgiveness,transfers byimmigrants, the sale or purchases of rights to naturalresourcesorpatents
Balance of Payment(2) Capital Account (as defined in the 1993 system of National Accounts and the fifth edition of IMF’s BOP Manual) ❖ The new capital account includes unilateral current transfers that are really shifts in assets, not current income. E.g. debt forgiveness, transfers by immigrants, the sale or purchases of rights to natural resources or patents
BalanceofPayment(3)FinancialAccountThefinancial account(whichwascalledthecapitalaccountpreviously)summarizedtheflow offundsresulting from the sale of assets between one specifiedcountry and all other countries.Assets including direct foreign investment, investmentsinsecurities,andotherinvestment assets
Balance of Payment (3) Financial Account ❖ The financial account (which was called the capital account previously) summarized the flow of funds resulting from the sale of assets between one specified country and all other countries. ❖ Assets including direct foreign investment, investments in securities, and other investment assets