National Income, BOP Accounting and Central Banking. Monetary Theory and Policy UFM Summer, 2006. 1. National Income Accounting. Y = C + I + G + CA S = Y – C – G Sp = I + CA – Sg = I + CA – ( T – G ) = I + CA + ( G – T )
Monetary Theory and Policy
absorption approach, elasticity approach
*Causes of current account deficit
*Adding up the world CA is not equal to 0?
recorded in the current account
recorded in the financial account
recorded in the capital account.
*Over-holding of foreign reserves (3-6 months of imports): cost and benefit (ex. Asian countries after crisis)
*Flow and stock (total reserves minus gold)