Havens flight balances evened out credits current

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Unformatted text preview: apital account Reserves Total Debits 1000 500 100 1600 Current account 800 Capital account 400 Reserves 200 Total 1400 E&O 200 Balance of Payments and Exchange Rate Regime 2 Kinds of regime Freely Floating Pegged or managed float Freely Freely floating does not use reserves in FE market FE Peg & MF does Peg Balance of payments and national income accounting income The The balance of payments is part of the national accounts ( GNP/GDP) national This is a functional not just an accounting This relationship, and knowing the functional part helps us analyze economies’ performance performance BoP in the GDP BoP Uses of Output Closed economy: Y=C+I+G Open economy Y+M=C+I+G+X Y=C+I+G+(X-M) Eq.1 Uses of Income: Y=C+Sp+T Eq. 2 Y=C+Sp+T putting 1 & 2 together putting C+I+G+...
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