tailieunhanh - Bài giảng International financial management: Chapter five - Ngo Thi Ngoc Huyen

Bài giảng "International financial management - Chapter five: Balance of payments" has contents: Components of the Balance of Payments (BOP), composition of each component, how are the BOP components affected, policy implications for managing BOP. | CHAPTER FIVE OVERVIEW CHAPTER FIVE • Components of the Balance of Payments (BOP) BALANCE OF PAYMENTS • Composition of each component • How are the BOP components affected • Policy implications for managing BOP 1 2 BALANCE OF PAYMENTS ACCOUNTING PRINCIPLES DESCRIPTION OF BALANCE OF PAYMENT ACCOUNTING • • Economic transactions between domestic and foreign Summarizes economic transaction between residents of one country and the rest of the world. Transactions include – Import and Export of goods and services – Transfers – Capital Flows residents. • • Viewpoint of one country (. USA). • • Domestic assets and domestic liabilities are changed using BOP account as an itemization of the factors behind the demand and supply of a currency Rules of Debits and Credits – Credits (+): Transactions that represent demands for the local currency in the foreign exchange market. Result from purchases by foreigners of goods, services, financial and real assets, gold and foreign exchange • Export of goods and services (sale • Receipt of gifts • Borrowing (sale of stocks, bonds etc • Investment by foreign residents (real estate, expansion of plant and equipment etc • Decrease in Official Reserve of gold/foreign currency debits and credits. 3 4 1 BALANCE OF PAYMENTS ACCOUNTING PRINCIPLES DESCRIPTION OF BALANCE OF PAYMENT ACCOUNTING – Debits(-): Transactions that represent supplies of local currency in the foreign exchange market. Result from purchases by residents of goods, services, financial and real assets, gold, or foreign exchange from foreigners. • Import of goods and services • Gifts and Transfers • Lending (purchase of foreign stocks, bonds etc • Local investment in foreign countries • Increases in Official Reserve of gold/foreign currency • Double-entry accounting system. – If a transaction creates supply of the nation's currency in the foreign exchange market it is recorded as a Debits (eg Imports) • Debits are used to increase assets and decrease .