1 Lecture 17 Don DeVoretz Balance of Payments, Current Account and Capital Account

2 Current Account: 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

3 Capital Account 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)

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

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

6 End of Show