《International Financial Management》课程教学课件（PPT讲稿）Chapter 2 Balance of Payment

The Balance ofPavmentsChapter Two

Chapter Objective: This chapter serves to introduce the student to thebalance of payments. How it is constructed andhow balance of payments data may be interpreted

❖Chapter Objective: ❖This chapter serves to introduce the student to the balance of payments. How it is constructed and how balance of payments data may be interpreted

Chapter OutlineBalance ofPayments AccountingBalance of Payments AccountsThe Current AccountThe Capital and Financial AccountStatistical DiscrepancyOfficialReservesAccountThe Balance of Payments ldentityBalance of Payments Trends in MajorCountries

Chapter Outline ❖Balance of Payments Accounting ❖Balance of Payments Accounts ▪ The Current Account ▪ The Capital and Financial Account ▪ Statistical Discrepancy ▪ Official Reserves Account ❖The Balance of Payments Identity ❖Balance of Payments Trends in Major Countries

BalanceofPaymentsAccountingThe Balance of Payments is the statisticalrecord of all transactions betweendomestic and foreign residents overacertain period of time in the form ofdouble-entry bookkeepingN.B.what are we referring to when we say“residents"?

Balance of Payments Accounting ❖The Balance of Payments is the statistical record of all transactions between domestic and foreign residents over a certain period of time in the form of double-entry bookkeeping. N.B. what are we referring to when we say “residents” ?

BalanceofPaymentAccountsThe BOP accounts are composed of thefollowing(as defined in the fifth edition of IMF's Balance of PaymentsManual)TheCurrentAccountThe Capital and Financial AccountStatistical DiscrepancyThe Official Reserves AccountREFERENCE:SixthEditionoftheIMF'sBalance of Payments and InternationalInvestment PositionManual

Balance of Payment Accounts ❖The BOP accounts are composed of the following (as defined in the fifth edition of IMF’s Balance of Payments Manual) ▪ The Current Account ▪ The Capital and Financial Account ▪ Statistical Discrepancy ▪ The Official Reserves Account REFERENCE: Sixth Edition of the IMF's Balance of Payments and International Investment Position Manual

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

Balanceof Payment(3)FinancialAccountTransactionsthat create financial inflows (fromthe viewpoint of China)Foreigndirect investment (inChina)Foreign portfolio investment (in China)Other foreign assets (in China, net)TransactionsthatcreatefinancialoutflowsForeigndirect investment (madeby China)Foreignportfolioinvestment (madebyChina)Other (Chinese) assets abroad, netBFA:financialaccountbalanceBFA=Financialinflows-Financialoutflow

Balance of Payment (3) Financial Account ❖Transactions that create financial inflows (from the viewpoint of China) Foreign direct investment (in China) Foreign portfolio investment (in China) Other foreign assets (in China, net) ❖Transactions that create financial outflows Foreign direct investment (made by China) Foreign portfolio investment (made by China) Other (Chinese) assets abroad, net ❖BFA: financial account balance ❖ BFA =Financial inflows-Financial outflow