Numerical problem. Balance of Payment

Transcription

1 Numerical problem Balance of Payment

2 Here are some balance of payments data (without pluses and minuses): Merchandise exports, 100 Merchandise imports, 125 Tourism exports, 90 Insurance imports, 80 Income receipts from abroad (profit multinationals), 110 Income payments (interest payments) to foreigners, 150 Increase in home country s ownership of assets abroad, 160 Increase in foreign ownership of assets in home countries, 200 Assuming that unilateral transfer equal zero, find the merchandise trade balance, net exports (services and income), the current account balance, the capital and financial account balance and the Official Reserve Assets.

3 Solution: Merchandise trade balance (or net exports goods): = - 25 Net exports services: = +10 Net income from abroad (or net factor patments): = - 40 Current account balance: ( ) - 55 Capital and Financial account balance: +40 ( ) Net holdings of reserve assets (decrease): = +15 Since CA < 0, country needs to finance its CA deficit. Must borrow from foreigners or sell to foreigners some of its assets.

4 Balance of Payments Account of the U.S., 1998 (Billions of Dollars) Current Account Net exports of goods and services (NX) Exports of goods and services Goods Services Imports of goods and services Goods Services Net income from abroad Income receipts from abroad Income payments to residents of other countries Net unilateral transfers Current Account Balance

5 Capital And Financial Account Capital Account Net capital account transactions 0.6 Financial Account Net financial flows Increase in U.S. owned assets abroad (financial outflow) U.S. official reserve assets Other foreign assets Increase in foreign-owned assets in U.S. (financial inflow) Foreign official assets Other foreign assets Capital and Financial Account Balance (KFA) Statistical Discrepancy 10.1

6 Balance on goods (merchandise trade balance) = Balance on goods and services = Balance on goods, services, and income =

7 Numerical problem Balance of Payment

8 Here are some balance of payments data (without pluses and minuses): Merchandise exports, 100 Merchandise imports, 125 Tourism exports, 90 Insurance imports, 80 Income receipts from abroad (profit multinationals), 110 Income payments (interest payments) to foreigners, 150 Increase in home country s ownership of assets abroad, 160 Increase in foreign ownership of assets in home countries, 200 Assuming that unilateral transfer equal zero, find the merchandise trade balance, net exports (services and income), the current account balance, the capital and financial account balance and the Official Reserve Assets.

9 Solution: Merchandise trade balance (or net exports goods): = - 25 Net exports services: = +10 Net income from abroad (or net factor patments): = - 40 Current account balance: ( ) - 55 Capital and Financial account balance: +40 ( ) Net holdings of reserve assets (decrease): = +15 Since CA < 0, country needs to finance its CA deficit. Must borrow from foreigners or sell to foreigners some of its assets.

10 Balance of Payments Account of the U.S., 1998 (Billions of Dollars) Current Account Net exports of goods and services (NX) Exports of goods and services Goods Services Imports of goods and services Goods Services Net income from abroad Income receipts from abroad Income payments to residents of other countries Net unilateral transfers Current Account Balance

11 Capital And Financial Account Capital Account Net capital account transactions 0.6 Financial Account Net financial flows Increase in U.S. owned assets abroad (financial outflow) U.S. official reserve assets Other foreign assets Increase in foreign-owned assets in U.S. (financial inflow) Foreign official assets Other foreign assets Capital and Financial Account Balance (KFA) Statistical Discrepancy 10.1

12 Balance on goods (merchandise trade balance) = Balance on goods and services = Balance on goods, services, and income =

13 Numerical problem Balance of Payment

14 Here are some balance of payments data (without pluses and minuses): Merchandise exports, 100 Merchandise imports, 125 Tourism exports, 90 Insurance imports, 80 Income receipts from abroad (profit multinationals), 110 Income payments (interest payments) to foreigners, 150 Increase in home country s ownership of assets abroad, 160 Increase in foreign ownership of assets in home countries, 200 Assuming that unilateral transfer equal zero, find the merchandise trade balance, net exports (services and income), the current account balance, the capital and financial account balance and the Official Reserve Assets.

15 Solution: Merchandise trade balance (or net exports goods): = - 25 Net exports services: = +10 Net income from abroad (or net factor patments): = - 40 Current account balance: ( ) - 55 Capital and Financial account balance: +40 ( ) Net holdings of reserve assets (decrease): = +15 Since CA < 0, country needs to finance its CA deficit. Must borrow from foreigners or sell to foreigners some of its assets.

16 Balance of Payments Account of the U.S., 1998 (Billions of Dollars) Current Account Net exports of goods and services (NX) Exports of goods and services Goods Services Imports of goods and services Goods Services Net income from abroad Income receipts from abroad Income payments to residents of other countries Net unilateral transfers Current Account Balance

17 Capital And Financial Account Capital Account Net capital account transactions 0.6 Financial Account Net financial flows Increase in U.S. owned assets abroad (financial outflow) U.S. official reserve assets Other foreign assets Increase in foreign-owned assets in U.S. (financial inflow) Foreign official assets Other foreign assets Capital and Financial Account Balance (KFA) Statistical Discrepancy 10.1

18 Balance on goods (merchandise trade balance) = Balance on goods and services = Balance on goods, services, and income =