BALANCE OF BALANCE OF PAYMENTPAYMENT

by Shalini

• Trade: Exchange of goods and services with other

nations. • Export Goods and services sold to other countries• Import Goods and services bought from other

countries

• In addition, trading involve exchange of Visible and invisible goods

• Visible goods: Are the material goods exported and imported.

• Invisible products: Are the non merchandise item.

Balance of TradeBalance of Trade• It is the difference between the

monetary value of exports and imports in an economy over a certain period of time (only visible goods).

Balance Of PaymentBalance Of Payment• Balance of payment takes into

account both the invisible and visible items.

Components Of BOPComponents Of BOP

• Current Account

• Capital Account

Current AccountCurrent Account• The current account refers to

balance in flow of goods and services and other current receipts and payments.

Capital AccountCapital Account• Export and Import of capital and the

difference between the two represent countries capital account balance

Eg Foreign investment and loans

BOP Disequilibrium-FactorsBOP Disequilibrium-Factors Disequilibrium occurs due to deficit

and surplus.

• Economic factors• Political Factors• Social Factors

CONCLUSIONCONCLUSION Balance of payment represents a

better picture of a country’s economic and financial transaction with the rest of the world.

Reference• International Business Environment

by Francis Cherunilam• Macroeconomic Policy Environment

by Shyamal Roy