JavaScript isn't enabled in your browser, so this file can't be opened. Enable and reload.

1 of 9

BALANCE OF PAYMENTS

Tapan Kumar Ghosh

Department of Economics

2 of 9

Definition

BOP of a country is a systematic record of all its economic transactions with the outside world in a given year.

Receipts	Payments
A. Current Account:
1. Export of goods (Visible exports)	1’. Import of goods (Visible imports)
2. Export of services (Invisible exports)	2’. Import of services (invisible imports)
3. Unrequited receipts	3’. Unrequited payments
B. Capital Account
4. Capital Receipts	4’. Capital Payments

Some Definitions

Current account consists of all transactions relating to trade in goods and services and unilateral transfers.

Capital account consists of all transactions in financial assets in the form of short –term and long-term lendings and borrowings, and private and official investments.

Example

Balance of payment always balances!

Equity Vs Equilibrium

Autonomous transaction: Transactions whose values are determined independently of the BOP

and

Accommodating transactions are determined by the net consequences of the autonomous items.

Receipts (in Million $)	Payments (in Million $)
Autonomous transactions:
1. Export of goods: 800	1’. Import of goods: 1000
2. Export of services: 300	2’. Import of services: 700
3. Unrequited Receipts: 100	3’. Unrequited payments: 50
4a. Capital Receipts: 200	4’a. Capital payments: 250
Accommodating transactions:
4b. Capital Receipts: 600	4’b. Capital payments: 0
Total: 2000	Total: 2000

1400 – 2000 = 600

Deficit in BOP

Equity but disequilibrium in BOP