国际商务ch06

1、1chapter 6the balance of payments2learning objectives to understand the fundamental principles of how countries measure international business activity, the balance of payments to examine the similarities of the current and capital accounts of the balance of payments to understand the critical diffe

2、rences between trade in merchandise and services and why international investment activity has recently been controversial in the united states to review the mechanical steps of how exchange rates are transmitted into altered trade prices and eventually trade volumes to understand how countries with

3、 different government policies toward international trade and investments, or different levels of economic development, differ in their balance of payments3introduction the measurement of all international economic transactions between the residents of a country and foreign residents is called the b

4、alance of payments (bop) the two major sub accounts of the balance of payments are:current accountcapital account4fundamentals of balance of payments accounting the balance of payments must balancesubaccounts may be imbalanced three main elements to the process of measuring international economic ac

5、tivity include:identifying what is and is not an international economic transactionunderstanding how the flow of goods, services, assets, and money creates debits and credits to the overall bopunderstanding the bookkeeping procedures for bop accounting5defining international transactions identifying

6、 many international transactions is ordinarily not difficult however, some international transactions are not obvious6the bop as a flow statement the bop is often believed to be a balance sheet rather than a cash flow statement there are two types of business transactions that dominate the bop:real

7、assetsfinancial assets7bop accounting: double-entry bookkeeping bop employs an accounting technique called double-entry bookkeeping in this age-old method every transaction produces a debit and a credit of the same amount a debit is created whenever:an asset is increaseda liability is decreasedan ex

8、pense is increased a credit is created whenever:an asset is decreaseda liability is increasedan expense is decreased8bop accounting: double-entry bookkeeping the measurement of all international transactions in and out of a country over a year is a difficult task mistakes, errors, and statistical di

9、screpancies will and do occur current and capital account entries are recorded independent of one another, not together as this accounting method would prescribe9the accounts of the balance of payments the bop is comprised of two primary subaccounts:current accountfinancial/capital account two addit

10、ional and important subaccounts of the bop include:net errors and omissions account official reserves account10the current account this account includes all international economic transactions with income or payment flows occurring within the year, the current period it consists of four subcategorie

11、s:goods tradeservices tradeincomecurrent transfers this account is typically dominated by goods trade11the current account the balance on trade (bot) refers specifically to the balance of exports and imports of goods trade only the deficits in the bot of the past decade have been an area of concern

12、for the u.s. merchandise trade is the core of international trade and has three major components:manufactured goodsagriculturefuels the most encouraging news for u.s. manufacturing trade is the growth of exports in recent years12the capital and financial account this account of the bop measures all

13、international economic transactions of financial assets it is divided into two major components:capital accountfinancial account13the capital account the capital account is made up of transfers of:financial assetsthe acquisition and disposal of nonproduced/nonfinancial assets14the financial account

14、the financial account consists of three components: direct investmentportfolio investmentother asset investments the contents of this account are for all intents and purposes the same as those of the capital account under imfs bop accounting framework used prior to 199615net direct investment this i

15、s the net balance of capital dispersed out of and into the u.s. for the purpose of exerting control over assets follows the 10% ownership threshold rule the source of concern over foreign investments in any country focuses on two topics:controlprofit16portfolio investment this is the net balance of

16、capital that flows in and out of the u.s., but does not reach the 10% ownership threshold of direct investment it is capital invested in activities that are purely profit-motivated rather than ones made in the prospect of controlling or managing the investment these have shown much more volatile beh

17、avior than net direct investments over the past decade17other investment assets/liabilities this category consists of:short-term trade creditslong-term trade creditscross-border loans from all types of financial institutionscurrency depositsbank depositsother accounts receivableaccounts payable18off

18、icial reserves account this is the total currency and metallic reserves held by official monetary authorities within the country its significance depends on whether the country is operating under:a fixed exchange rate regime a floating exchange rate system19the balance of payments-total the internat

19、ional monetary fund (imf) is the multinational organization that collects the bop statistics for over 160 different countries around the globe the current, capital, and financial accounts combine to form the basic balance and is one of the most frequently used summary measures of the bop the current, capital, financial, and net errors and omissions accounts combine to form the summary measure known as the overall balance or official settlements balance20the balance of payments and economic crises the sum of c