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Balance of Payments. Why should International Businesspeople pay attention to the Balance of Payments Statistics?. Balance of Payments. BOP statistics help identify emerging markets for goods and services. They can warn of possible new policies that may alter a nation’s business climate.

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balance of payments

Balance of Payments

Why should International Businesspeople pay attention to the Balance of Payments Statistics?

balance of payments2

Balance of Payments

BOP statistics help identify emerging markets for goods and services.

They can warn of possible new policies that may alter a nation’s business climate.

They can indicate a reduction in a nation’s foreign reserves.

They can indicate an increase in risk to lending to particular nations.

major components of the bop accounting system

Major Components of the BOP Accounting System

Current Account

Capital Account

Official Reserves

Errors and Omissions

current account

Current Account

Exports and Imports of goods

Exports and Imports of services

Investment Income

Gifts

Key to whether it’s an export or an import; what is the direction of the flow of money? Money flows in = export. Money flows out = import.

capital account

Capital Account

Records the purchases and sales of assets between residents of different countries.

  • Foreign Direct Investment (FDI)
  • Portfolio Investments
official reserves

Official Reserves

Gold

Convertible Securities

errors and omissions

Errors and Omissions

Records the purchases and sales of assets between residents of different countries.

how will the bop be affected

How will the BOP be affected?

An American entrepreneur seeking to sell souvenirs at the 2004 Olympics in Athens pays Olympic Airlines, a Greek airline, $1,400 for a New York–Athens round-trip ticket.

That entrepreneur instead pays United Airlines (an American airline) $1,400 for a New York-Athens round-trip ticket.

Ford Motor Company (U.S) pays $2.5 billion for the Jaguar Motor Company (U.K.).

The U.S. government gives Rwanda $500 million worth of food to feed starving refugees.

additional resources

Additional Resources

http://www.digitaleconomist.com/bop_4020.html

http://www.investopedia.com/articles/03/060403.asp

http://www.econlib.org/library/Enc/BalanceofPayments.html

http://en.wikipedia.org/wiki/Balance_of_payments