1. International Monitory System

2. Balance of Payments

3. Definitions “ A Financial statement summarizing the flow of goods, services and investment, funds between the residents of a given country and residents of the rest of the world.” Multinational business fin By By Eiteman Stone hill Moffett

4. “Net value of all economic transactions including trade in goods and services transfer payments, loans and investment between residents of the same country and of all other countries.” Foundation of Multinational Fin. Mgt By Allan c. Shapiro

5. “Statement of inflow and out flow payments for a particular country” IMFBy Jeff Madura Jeff Madura

6. Components of B O P CURRENT ACCOUNT (CA) CURRENT ACCOUNT (CA) CAPITAL ACCOUNT(KA) CAPITAL ACCOUNT(KA) OFFICIAL RESERVE ACCOUNT OFFICIAL RESERVE ACCOUNT

7. CURRENT ACCOUNT BALANCE OF TRADE :( Primary component of Current account ) BALANCE OF TRADE :( Primary component of Current account ) “ An entry in the BOP measuring the difference between the monetary value of merchandise Exports & imports.” “ An entry in the BOP measuring the difference between the monetary value of merchandise Exports & imports.”

8. CURRENT ACCOUNT MERCHANDISE IMPORTS MERCHANDISE IMPORTS EXPORTS EXPORTS SERVICES IMPORTS SERVICES IMPORTS EXPORTS EXPORTS FACTOR INCOME FACTOR INCOME UNILATERAL TRANSFERS PRIVATE UNILATERAL TRANSFERS PRIVATE OFFICIAL OFFICIAL

10. CAPITAL ACCOUNT FOREIGN DIRECT INVESTMENT (FDI s) FOREIGN DIRECT INVESTMENT (FDI s) FINANCING (Long term equity & Debt investments) FINANCING (Long term equity & Debt investments) OTHER CAPITAL (Short term deposits) OTHER CAPITAL (Short term deposits)

11. FOREIGN DIRECT INVESTMENT DEFINITION: DEFINITION: “The acquisition abroad of physical assets such as plant, equipment, with operating control residing in the parent corporation.” “The acquisition abroad of physical assets such as plant, equipment, with operating control residing in the parent corporation.”

12. OFFCIAL RESERVE ACCOUNT DEFINITION: DEFINITION: “The liquid assets of the Central Banks available for international payments are known as international liquidity usually referred to as the OFFICIAL RESERVES (or also known as monetary or international monetary reserves)”. “The liquid assets of the Central Banks available for international payments are known as international liquidity usually referred to as the OFFICIAL RESERVES (or also known as monetary or international monetary reserves)”. INTRODUCTION TO INTERNATIONAL ECONOMICS BY CJ JEPMA, H JAGER, E KAMPHUIS

13. OFFCIAL RESERVE ACCOUNT GOLD GOLD FOREIGN EXCHANGE FOREIGN EXCHANGE SDR s SDR s ECU ECU

14. FACTORS AFFECTING BOP COMPONENTS

15. ECONOMIC INFLATION INFLATION INTEREST RATES INTEREST RATES INCOME LEVELS INCOME LEVELS EXCHANGE RATES EXCHANGE RATES

16. GOVERNMENT RESTRICTIONS TARRIFS TARRIFS QUOTAS QUOTAS BLOCKED FUNDS BLOCKED FUNDS

17. CORRECTING Balance of trade Problems Any policy that will increase foreign demand for the country’s goods & services Any policy that will increase foreign demand for the country’s goods & services A deficit in a country’s BOP suggests that the country is spending a greater amount on foreign products than it is receiving from them. A deficit in a country’s BOP suggests that the country is spending a greater amount on foreign products than it is receiving from them. Restrict Imports Restrict Imports

18. AGENCIES THAT HELP TO SOLVE BOP PROBLEMS IMF 1944 IMF 1944 WORLD BANK(IBRD) 1944 WORLD BANK(IBRD) 1944 IFC (International Financial Corp.) 1956 IFC (International Financial Corp.) 1956 IDA (International Development Association ) 1960 IDA (International Development Association ) 1960 BIS (Bank of International settlements) BIS (Bank of International settlements) REGIONAL DEVELOPMENT AGENCIES: REGIONAL DEVELOPMENT AGENCIES: INTER-AMERICAN DEVELOPMENT BANK INTER-AMERICAN DEVELOPMENT BANK ASIAN DEVELOPMENT BANKS ASIAN DEVELOPMENT BANKS AFRICAN DEVELOPMENT FUND AFRICAN DEVELOPMENT FUND

19. IMF INTERNATIONAL MONETARY FUND DEFINITION: DEFINITION: “ An international istitution established under the Bretton Woods Agreement of 1944. The members of the IMF had first to announce the parity of their currencies.” “ An international istitution established under the Bretton Woods Agreement of 1944. The members of the IMF had first to announce the parity of their currencies.” (PARITY : being at par, equivalence) (PARITY : being at par, equivalence) In terms of gold or US $ or any currency unit In terms of gold or US $ or any currency unit

20. SDR s SPECIAL DRAWING RIGHTS DEFINITION : DEFINITION : “ A form of international reserve created by the IMF in 1968. The purpose was to assist the international liquidity by providing a complement to existing reserve vehicles such as gold,foreign currencies etc.” It was first given a value of 0.89 grams of gold or US $ 1,which was then $/gold parity It was first given a value of 0.89 grams of gold or US $ 1,which was then $/gold parity

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