Wk12_1Nov_Ch16_BOP

Wk12_1Nov_Ch16_BOP - Chapter 16: Balance of Payments (BoP)...

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Unformatted text preview: Chapter 16: Balance of Payments (BoP) Accounting Ugh, or better yet, yuk Week 12: November 1-3, 2011 BoP Record of all cross-border transactions between residents of one nation and the rest of the world during a set time period. United States These transactions consist of goods, services, financial and labor payments, and assets. Transactions are recorded if they occur btw U.S. residents and the RoW Two Major Sub-Accounts Current Account or CA goods, services (including labor and capital services) Financial Account or FA financial instruments Current Account or CA Record of all sales or purchases of goods and services AND income paid or received from labor or financial capital Export good, service Export effort Financial Account or FA Record of all sales or purchases of assets (claims) such as currency, bank deposits, stocks, bonds, promissory notes Export Sale/Export/Transfer of Asset or Liabilities Stock, CD, Bond, Promissory Note or Claim Double-entry System Each transaction has two entries. The first entry is (+) or () and the other will be of equal amount but opposite sign. Things are exported or imported- If the thing is exported, its value is recorded as (+) and the revenue for the export is recorded as (-) .- If the thing is imported, its value is recorded as (-) and the payment for the thing as (+). Exports of Things Export or Sale of thing recorded as (+) Payment for thing $$$ recorded as (-) Imports of Things Import or Purchase of thing recorded as (-) Payment for thing $$$ Recorded as (+) Examples of Exports + First Entry Boeing sells aircraft to Aeromexico Delta sells air service to Brit who flies to U.S. Export of labor services by Yank working in Turkey Export of the services of capital by American who owns a U.K. government bond (the principal is working in the U.K.) Sale of U.S. Treasury note to China (+) in CA (+) in CA in More Detail GOODS Export (Xg) and Import (Mg) of goods Trade balance: Xg-Mg SERVICES Export (Xs) and Import (Ms) of services INCOME Income Received (IR) and Income Paid (IP) Net Unilateral Transfers (UT) Loans to Foreigners or import of IOUs From foreigners Purchas e Of Foreign Stocks FAp DAp DAg FAg Xgs IR UT Mgs IP FA in More Detail Two types of assets: foreign (e.g., share of British bank) FA i U.S. (e.g., share of Ford Motor Company) DA i Distinguished by ownership: private entities ( p ) versus central banks ( g )....
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This note was uploaded on 01/28/2012 for the course ECN 306 taught by Professor Croucher during the Fall '08 term at ASU.

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Wk12_1Nov_Ch16_BOP - Chapter 16: Balance of Payments (BoP)...

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