Balance of Payments, Current Account and Capital Account Lecture 12 Don DeVoretz Balance of Payments, Current Account and Capital Account

Current Account: Current Account = (A-B+C-D+E) < or > than 0 1. Exports of goods and Services = A 2. Imports of G and S = B 3. Investment Income = C 4. Debt Service = D 5. Remittances = E Current Account = (A-B+C-D+E) < or > than 0

Capital Account Capital Account= (G+H-I-K) 6. Direct Private Investment =G 7. Foreign Loans = H 8. Foreign Assets Domestic Banks = I 9. Capital Outflow =K Capital Account= (G+H-I-K)

Equilibrium: Balance of Payments +/- Cash Reserves = Current Plus Capital Account What if no CASH Reserves in hard currency ? BORROW

From Whom ? IMF Private Banks: BNS Bilateral Gov’t Loans Multilateral Japan,USA and EU Multilateral Inter-American Bank IMF

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