I.
Measure of money inflows and outflow between the US and the
world.
a.
Inflows are credits
b.
Outflows are debits
II.
Three accounts
a.
Current Account
i.
Balance of trade: Exports are a credit while imports are a
credit
ii.
Net foreign income: Income earned by American foreign assets-
income paid to foreign held US assets
iii.
Net Transfers (unilateral): Foreign aid is a debit.
b.
Capital Account
i.
The balance of capital ownership
ii.
Purchase if real and financial assets
iii.
Direct investment in the US is a credit to the capital
account.
iv.
Direct investment by US firms in a foreign country is a
debit.
v.
Purchase of foreign financial assets is a debit
vi.
Purchase of domestic financial assets by foreigners is a
credit.
c.
Official Reserves
i.
Foreign currency holdings of the Fed.
ii.
When there is a balance of payments surplus Fed accumulates
foreign currency and debits the balance of payments.
iii.
When there is a balance of payments deficit the fed depletes
foreign currency and credits the balance of payments.
iv.
Official Reserves + balance of payments = 0
III.
Current + Capital= 0
IV.
Balance of Trade:
a.
Exports - imports
V.
Balance of Goods & Services:
a.
(Goods exports + services exports) - (Goods imports +
services imports)
VI.
Balance on Current Account:
a.
Balances of Goods & Services + Net investment + net
transfers
VII.
Balance on Capital Account:
VIII.
Official Reserves
a.
Add current account + capital account = 0
No comments:
Post a Comment