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Unformatted text preview: Balance of Payments and Foreign Direct Investment Balance of Payments- The Balance of Payments (BOP) accounts for a country's international transactions for a period of time, typically a calendar year.- The BOP includes:- The current account- The capital/Fnancial account BOP Accounting- Double entry system so each (+) transaction has a balancing (-) transaction. Also each current account entry is offset by a Fnancial account entry. So, overall the account should be in balance.- Positive (+) transactions on current account result from receipt of payment from foreigners- Merchandise exports- Transportation and travel receipts- Income received from investments abroad- Gifts received from foreign residents- Aid received from foreign governments BOP Accounting continued- Negative transactions (-) on current account involve payments to foreigners- Merchandise imports- Transportation and travel expenditures- Income paid on investments of foreigners- Gifts to foreign residents- Aid given by home government- Overseas investments by home country residents Example entries: U.S. Balance of Payments Current Account- $20,000 car import from Japan + $1.5 million factory export to India- 200 billion imports from China...
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This note was uploaded on 12/11/2011 for the course INTBUS 200 taught by Professor Tuli during the Fall '11 term at University of Wisconsin.
- Fall '11