Ses8BalanceofPayments

Ses8BalanceofPayments - Key elements of Monetary Policy...

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Key elements of Monetary Policy Part II Economic Policy Course for Civil Society June 2004 World Bank Institute
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Structure of the Presentation Introduction Current account Balance of Payments Debt
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Current account The national income accounts and the balance of payments accounts are essential tools for studying the macroeconomics of open, interdependent economies. National income accounting Records all the expenditures that contribute to a country s income and output Balance of payments accounting Helps us keep track of both changes in a country s indebtedness to foreigners and the fortunes of its export- and import-competing industries
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Current account The National Income Identity for an Open Economy It is the sum of domestic and foreign expenditure on the goods and services produced by domestic factors of production: Y = C + I + G + EX IM where: Y is GNP C is consumption I is investment G is government purchases EX is exports IM is imports In a closed economy, EX = IM = 0.
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Current account 2 Current account ( CA ) balance The difference between exports of goods and services and imports of goods and services ( CA = EX IM ) A country has a CA surplus when its CA > 0. A country has a CA deficit when its CA < 0. CA measures the size and direction of international borrowing. A country s current account balance equals the change in its net foreign wealth.
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Current account 3 CA balance is equal to the difference between national income and domestic residents spending: Y (C+ I + G) = CA CA balance is goods production less domestic demand. CA
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Ses8BalanceofPayments - Key elements of Monetary Policy...

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