9/13/2010
Balance of Payments:
Chapter Objective
3
Chapter Three
•Components of the Balance of Payments (BOP)
•How to interpret each component
•How are the BOP components affected
•Policy
y implications
p
for managing
g g BOP
.
3-0
Chapter Outline
z
z
Balance of Payments Accounting
Balance of Payments Accounts
z
z
z
z
z
z
The Current Account
The Capital Account
Statistical Discrepancy
Official Reserves Account
The Balance of Payments Identity
Balance of Payments Trends in Major
Countries
3-1
1
9/13/2010
Balance of Payments Accounting
z
The Balance of Payments is the statistical record
of a country’s international transactions over a
certain period of time presented in the form of
double-entry bookkeeping.
3-2
Balance of Payments:
Double-entry accounting system
z
z
z
If a transaction creates supply
pp y of the nation's currencyy in the foreign
g
exchange market it is recorded as a Debits (eg Imports)
z Debits are used to increase assets and decrease liabilities.
If a transaction creates demand for the nation's currency in the foreign
exchange market it is recorded as a Credit (eg Exports)
z Credits are used to increase liabilities and decrease assets.
Since the foreign
g exchange
g market clears (i.e.
( supply
pp y = demand):
)
DEBIT = CREDIT
2
9/13/2010
Balance of Payments Accounts:
Components
z
They are composed of the following:
z
z
z
z
The Current Account
The Capital Account
The Official Reserves Account
Statistical Discrepancy
3-4
The Current Account
z
Includes:
z
z
z
z
z
z
All imports and exports of merchandise/goods
All imports and exports of services
All income receipts and payments (from investments)
All unilateral transfers of foreign aid
If the debits exceed the credits,
credits then a country is
running a trade deficit.
If the credits exceed the debits, then a country is
running a trade surplus.
3-5
3
9/13/2010
Goods/ Merchandise Transactions
Largest component of the Current Account,
It consists of:
z Exports: When US producers sell their products abroad, buyers
(foreigners) supply their own currencies and create a demand for
dollars in the FX market
z It is recorded as a credit transaction (+)
z Imports: When US residents buy products from abroad, they
supply
pp y dollars (and
(
create a demand for foreign
g currencies)) in the
FX market.
z It is recorded as a debit transaction (-)
z Merchandise Export - Merchandise Import: Largely
Negative (for US)
z Examine US Merchandise Trade Balance Data
z
4
9/13/2010
Service Transactions
z
z
z
Export and Import of Services
Travel / Transportation / Financial / Insurance /
Computer & Information / Construction /
Communication
The net difference (export - import) for US is:
z
z
z
Service Exports - Service Imports: Generally positive
Smaller then Merchandise Export - Imports
Has grown over the past years
Other Current Accounts
z
Income Receipts and Payments Income (interest
(interest,
dividend, etc) received from US investment abroad minus
income paid to foreigners investing in the US
z
Unilateral Transfers
z
z
z
Net of gift received from and given to foreign countries
Mostlyy negative
g
Examine US Current Account Statistics
5
9/13/2010
US Current Account Flow (billion USD)
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Goods
-77
-97
-132
-166
-174
-191
-198
-248
-348
-455
-429
-485
485
-550
-669
-787
-838
-819
-840
Service
46
58
62
67
78
87
90
82
83
75
64
61
54
62
76
85
119
144
Income
24
24
25
17
21
22
13
4
14
21
32
27
45
67
72
57
82
118
Transfer
10
-35
-40
-40
-38
-43
-45
-53
-50
-59
-51
-65
65
-71
-84
-90
-92
-113
-128
Current Account
3
-50
-85
-121
-114
-124
-141
-215
-302
-417
-385
-461
461
-523
-624
-729
-788
-731
-706
U.S. Balance of Payments Data 2007:
(in $ billions)
Credits
Curent Account
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital Account
Statistical Discrepancies
Official Reserve
Debits
$1 646
$1,646
$818
$22
$238
$1,152
$675
$775
-$2,346
-$735
-$135
-$731
-$333
-$295
-$662
-$41
$0.13
3-11
6
9/13/2010
U.S. Balance of Payments Data 2007
Credits
Curent Account
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
-$2,346
-$735
$135
-$731
-$333
-$295
-$662
-$41
$0.13
IIn 2007,
2007 the
h
U.S. imported
more than it
exported, thus
running a
current account
deficit of $731
billion.
3-12
The Capital Account
z
z
The capital account measures the difference
between U.S. sales of assets to foreigners and
U.S. purchases of foreign assets.
In 2007, the U.S. enjoyed a $775 billion capital
account surplus—absent of U.S. borrowing from
foreigners this “finances”
foreigners,
finances our trade deficit.
deficit
3-13
7
9/13/2010
Capital Account Components
z
The capital account is composed of:
z
z
z
Foreign Direct Investment (FDI)
portfolio investments
other investments.
3-14
Capital Accounts Treatment
z
Capital account transactions:
z
z
z
Debit:
z
z
z
z
z
Reflects the flow of capital in and out of the US
Affects the FX market:
Increase in US investments overseas
Decrease in overseas investments in the US
Capital Outflow from the US
It creates a supply of $ in FX market
C di
Credit:
z
z
z
z
Decrease in US investments overseas
Increase in overseas investments in the USI
Capital Inflow into the US
It creates a demand for $ in FX market
8
9/13/2010
Sovereign Wealth Funds
z
z
Government-controlled investment funds are
playing an increasingly visible role in
international investments.
SWFs are mostly domiciled in Asian and MidEast countries usually are responsible for
recycling foreign exchange reserves of these
countries swelled by trade surpluses and oil
revenues.
3-16
U.S. Balance of Payments Data 2007
Credits
Curentt A
C
Accountt
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
-$2,346
-$735
$135
-$731
-$333
-$295
-$662
-$41
$0.13
During the same
year, the U.S.
attracted net
investment of
$775 billion—
clearly the rest
of the world
found the U.S.
to be a good
place to invest.
3-17
9
9/13/2010
The Official Reserves Account
z
Official reserves assets include:
z
z
z
Gold
Foreign currencies
Special Drawing Rights (SDRs) – a reserve positions
with the International Monetary Fund (IMF)
3-18
Official Reserves Account Treatment
z
z
z
z
Credit: Decrease in US Government’s holding of
gold, FX, or SDR: transactions
i
by
b Fedd or US
Treasury
Debit: Increase in US Government’s holding of
gold, FX, or SDR : transactions by Fed or US
Treasury
Current Account Balance + Capital Account
Balance + Official Reserve Account = 0
Used to offset the net effects of the Current and
Capital Account balances.
10
9/13/2010
Statistical Discrepancy
z
z
z
There’s going to be some omissions and
misrecorded transactions—so we use a “plug”
figure to get things to balance.
Exhibit 3.1 shows a discrepancy of $18 billion in
2006.
In 2007 it was $ 41 billion
3-20
U.S. Balance of Payments Data 2007
Credits
Curentt A
C
Accountt
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
-$2,346
-$735
$135
-$731
-$333
-$295
-$662
-$41
$0.13
In the real
world, there
is a statistical
discrepancy –
can be large
in some
years.
3-21
11
9/13/2010
The Balance of Payments Identity
BCA + BKA + BRA = 0
where
BCA = balance on current account
BKA = balance on capital account
BRA = balance on the reserves account
Under a pure flexible exchange rate regime,
BCA + BKA = 0
3-22
U.S. Balance of Payments Data 2007
Credits
Curentt A
C
Accountt
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
-$2,346
-$735
$135
-$731
-$333
-$295
-$662
-$41
$0.13
Under a pure
flexible
exchange rate
regime, these
numbers would
balance each
other out.
3-23
12
9/13/2010
U.S. Balance of Payments Data 2006
Credits
Curentt A
C
Accountt
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
-$2,346
-$735
-$136
-$733
-$333
-$295
-$662
Including that,
the balance of
payments identity
should hold:
BCA + BKA = – BRA
-$41
$0.13
($731) + $775 + ($41) = ($0.13)
3-24
What Economic and Political factors
will Impact BOP components?
z
z
z
z
z
Inflation
Business Cycles
Interest rates
FX prices
Government Policy
13
9/13/2010
Inflation & BOT
z
If domestic inflation / price levels increase:
z
z
Export will decrease
Imports will increase
z
z
BOT will decrease
If domestic inflation / price levels decrease:
z
z
Export will increase
Imports will decrease
z
BOT will increase
National Income (GNP) & BOT
z
If national income / prosperity increases:
z
Imports will increase more than exports:
z
z
BOT will decrease:
If national income / prosperity decreases:
z
Imports will decrease more than exports:
z
BOT will increase:
14
9/13/2010
Price Of Dollar & BOT
z
If the price of $ increases:
z
z
Export will decrease:
Imports will increase:
z
z
BOT will decrease
If the price of $ decreases:
z
z
Export will increase:
Imports will decrease:
z
BOT will increase
Price of Dollar & BOT :
Another Look
Reasons why
y decline in $ prices
p
will not always
y
correct the BOT deficit:
(1) Capital flows into the US.
(2) The producer of the import may respond by lowering price of their
product.
(3) The price of a currency does not change uniformly with all
currencies
(4) The J - Curve effect
15
9/13/2010
The J-Curve Effect
Change in the Trade Balancce
Following a currency
depreciation, the trade
balance may at first
deteriorate before it
improves.
The shape depends on
the elasticity of the
imports and exports.
exports
As an example, consider an imported good for which
there is no domestic producer. If demand is price
inelastic, then following a depreciation the trade
balance gets worse (until domestic production begins).
Time
3-30
Government Policy & BOP
z
Methods used by governments to reduce BOT deficit:
z
z
Currency depreciation
Protectionism
z
z
z
quotas
tariffs
Regulating flow of international capital
16
9/13/2010
Mercantilism and the Balance of Payments
z
z
z
Mercantilism holds that a country should avoid
trade deficits at all costs, even to imposing
various restrictions on imports.
Mercantilist ideas were criticized in the 18th
century by such British thinkers as Adam Smith,
David Ricardo,
Ricardo and David Hume.
Hume
They argued that the main source of wealth in a
country is its productive capacity not its trade
surpluses.
3-32
Balance of Payments and the
Exchange Rate
Credits
Curentt A
C
Accountt
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
-$2,346
-$735
$135
-$731
-$333
-$295
-$662
-$41
$0.13
Exchange rate $
P
S
D
Q
3-33
17
9/13/2010
BOP & the Price Of Dollar
z
If Export > Import: BOT surplus
z
z
z
If Export < Import: BOT deficit
z
z
z
Excess supply for $ in the FX market
Price of $ may decrease
Net outflow of investments from US
z
z
z
Excess Demand for $ in the FX market
P i off $ may increase
Price
i
Excess supply
E
l for
f $ in
i the
h FX market
k
Price of $ may decrease
Net inflow of investments into US
z
z
Excess demand for $ in the FX market
Price of $ may increase
Balance of Payments and the
Exchange Rate
Credits
Curentt A
C
Accountt
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
-$2,346
-$735
$135
-$731
-$333
-$295
-$662
-$41
$0.13
Exchange rate $
P
S
D
Q
As U.S. citizens import and invest, they are supply dollars to the FOREX
market.
3-35
18
9/13/2010
Balance of Payments and the
Exchange Rate
Credits
Curent Account
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital
p
Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
$
-$2,346
-$735
$135
-$731
-$333
-$295
-$662
Exchange rate $
P
S
-$41
$0.13
D
Q
As U.S. citizens export and foreigners invest in the US, there is demand
dollars at the FOREX market.
3-36
Balance of Payments and the
Exchange Rate
Credits
Curent Account
Exports
Imports
Income Reciepts
Unilateral Transfers
Balance on Curent Account
Direct Investments
Portfolio Investments
Other Investments
Balance on Capital
p
Account
Statistical Discrepancies
Official Reserve
Debits
$1,646
$818
$22
$238
$1,152
$675
$775
$
-$2,346
-$735
$135
-$731
-$333
-$295
-$662
-$41
$0.13
Exchange rate $
P
S
S1
D
Q
As the U.S. government sells dollars, the supply of dollars increases.
3-37
19
9/13/2010
Feedback Loop In the BOT
z
BOT deficit (decreases) in the US : Imports > Exports
z
z
z
z
z
Excess supply of $ in the FX market
Price of $ will decline
Export will increase and Imports will decrease
BOT will increase
BOT surplus (increases) in the US : Imports < Exports
z
z
z
z
Excess demand for $ in the FX market
Price of $ will increase
Export will decrease and Imports will increase
BOT will decrease
Balance of Payments Trends
z
z
Since 1982 the U.S. has experienced continuous
deficits on the current account and continuous
surpluses on the capital account.
During the same period, Japan has experienced
the opposite.
3-39
20
9/13/2010
Bal ance of Payments
U.S. Balance of Payments 1982-2006
1000
800
600
400
200
0
-2001982
-400
-600
600
-800
-1000
U.S. BCA
U.S. BKA
1987
1992
1997
2002
2007
Year
Source: IMF International Financial Statistics Yearbook, various issues
3-40
Japan Balance of Payments 1982-2006
200
150
Year
100
50
0
-501980
Japan BCA
Japan BKA
1985
1990
1995
2000
2005
2010
-100
100
-150
Balance of Payments
Source: IMF International Financial Statistics Yearbook, various issues
3-41
21
9/13/2010
Balance of Payments Trends
z
Germany traditionally had current account
surpluses.
l
z
z
z
z
From 1991 to 2001Germany experienced current
account deficits.
This was largely due to German reunification and the
resultant need to absorb more output domestically to
rebuild the former East Germany.
y
Since 2001 Germany returned to its earlier pattern.
What matters is the nature and causes of the
disequilibrium.
3-42
Balance of Payments Trends in Major
Countries 1982-2006
Balan ce of Payments
1000
500
0
1982
1987
1992
1997
2002
-500
-1000
Year
2007
China BCA
China BKA
Japan BCA
Japan BKA
Germany BCA
Germany BKA
UK BCA
UK BKA
U.S. BCA
U.S. BKA
Source: IMF International Financial Statistics Yearbook, various issues
3-43
22
9/13/2010
Relationship between Balance of Payments
and National Income Accounting
z
National income (Y), or gross domestic product
(GDP) is equal to the sum of the nominal
consumption (C) of goods and services, private
investment (I), government spending (G), and the
difference between exports (X) and imports (M):
Y ≡ GDP ≡ C + I + G + (X – M)
3-44
Relationship between Balance of Payments
and National Income Accounting
z
z
Private savings is defined as the amount left from
national income after consumption and taxes (T)
are paid:
S ≡ Y – C – T or
S ≡ C + I + G + (X – M) – C – T
N that
Note
h BCA ≡ X – M and
d we can rearrange the
h
last equation as
(S – I) + (T – G) ≡ X – M ≡ BCA
3-45
23
9/13/2010
Relationship between Balance of Payments
and National Income Accounting
z
z
z
(S – I) + (T – G) ≡ X – M ≡ BCA
This shows that there is an intimate relationship
between a country’s BCA and how it finances its
domestic investment and pays for government
spending.
If (S – I) < 0 then a country’s domestic savings is
insufficient to finance domestic in vestment.
Similarly, if (T – G) < 0, then tax revenue is
insufficient to cover government spending and a
government budget deficit exists.
3-46
Relationship between Balance of Payments
and National Income Accounting
z
z
(S – I) + (T – G) ≡ X – M ≡ BCA
When BCA < 0,
0 government budget deficits and
or part of domestic investment are being financed
by foreign-controlled capital.
To reduce a BCA deficit, one of the following
must occur:
z
z
z
For a given level of S and I, the government budget
deficit (T – G) must be reduced
For a given level of I and (T – G), S must be increased
For a given level S and (T – G), I must fall.
3-47
24
9/13/2010
Top Ten Countries with which the U.S. has a Trade Deficit:
2009
Country Name
China
Japan
Mexico
Federal Republic of Germany
Nigeria
Venezuela
Canada
Saudi Arabia
Italy
Malaysia
Deficit
D
fi it i
in
Millions
of US$
-20,223.56
-5,432.84
-5,138.50
-3,221.08
-2,062.90
-1,606.19
-1,418.62
-1,395.11
-1,344.03
-1,158.27
Year To Date
D
Deficit
fi it i
in
Millions
ofUS$
-208,687.97
-40,160.48
-42,310.19
-25,035.84
-13,295.18
-16,585.34
-17,178.56
-10,302.54
-12,897.85
-11,679.86
3-48
Top Ten Countries with which the U.S. has a Trade Deficit:
1998
Year-To-Date
Country Name
Japan
China
Federal Republic Of Germany
Mexico
Taiwan
Canada
Italy
Korea, Republic Of
France
Malaysia
Deficit in
Millions
of US$
-5,249.77
-4,707.49
-1,754.84
-1,604.54
-1,452.96
-1,239.68
1,239.68
-1,075.63
-943.84
-900.04
-858.85
Deficit in
Millions
of US$
-31,018.24
-25,119.73
-10,798.21
-7,138.59
-6,628.92
-8,245.93
8,245.93
-5,659.12
-4,176.92
-2,463.38
-3,748.75
3-49
25
9/13/2010
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES: 2000
MAJOR FOREIGN HOLDERS OF TREASURY SECURITIES: 2009
26
9/13/2010
China's Foreign Exchange Reserve Levels (US$ Billion)
2500
2000
1500
1000
500
0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
3-52
(Credits +; debits -)
Current account
Exports of goods and services
Goods
Services
Income receipts
Imports of goods and services
Goods, balance of payments basis
Services
Income payments
Unilateral current transfers, net
2005
2006
2007
2008
2009
1281186
909016
372171
535263
1995362
1692817
-302546
-462905
-105772
1452783
1035868
416916
682221
2212023
1875324
-336700
-634136
-91481
1648665
1160366
488299
829602
2350763
1983558
-367206
-730049
-115548
1839012
1304896
534116
796528
2537814
2139548
-398266
-644554
-122026
1570797
1068499
502298
588203
1945705
1575443
-370262
-466783
-124943
Capital account
Capital account transactions, net
13116
-1788
384
6010
-140
1475719
-122
-22273
1453324
-413993
-366512
-23089
-649730
156077
-4848
-529615
-140465
-52256
541342
-566266
-36235
-251199
-71207
-207625
1285729
2374
5346
1293449
-244922
-365129
-181299
-502099
690540
-351141
197897
421153
422631
-629552
-268680
-208213
124428
-277087
1247347
259268
213334
-421
26260
20095
988079
112638
132300
450386
8447
69572
214736
n.a.
33758
2065169
487939
428401
2816
22365
34357
1577230
243151
-58229
683245
2227
244793
462043
29710
-4727
2107655
481043
269897
5436
109019
96691
1626612
271210
66845
605414
-10675
182355
511463
6222
79552
454722
550770
591381
8912
-153423
103900
-96048
328334
161411
-166490
29187
-36522
-411968
-32947
84991
305736
450030
441056
57971
-70851
21854
-144294
134707
22781
59
12632
-1460
-313013
50804
162497
Financial account
U.S.-owned assets abroad, excluding financial derivatives (increase/financial outflow (-))
U.S. official reserve assets
U.S. government assets, other than official reserve assets
-546631
14096
5539
U.S. private assets
Direct investment
Foreign securities
U.S. claims on unaffiliated foreigners reported by U.S. nonbanking concerns
U.S. claims reported by U.S. banks and securities brokers/14/
Foreign-owned assets in the United States, excluding financial derivatives (increase/financial inflow
(+))
Foreign official assets in the United States
U.S. government securities
O
Other
U.S.
S government liabilities/11/
/ /
U.S. liabilities reported by U.S. banks and securities brokers
Other foreign official assets/12/
Other foreign assets in the United States
Direct investment
U.S. Treasury securities
U.S. securities other than U.S. Treasury securities
U.S. currency
U.S. liabilities to unaffiliated foreigners reported by U.S. nonbanking concerns
U.S. liabilities reported by U.S. banks and securities brokers/15/
Financial derivatives, net
Statistical discrepancy (sum of above items with sign reversed)
3-53 Summary:
27
BOP Practice Problems Set #1
1. Please enter the alphabets associated with each transaction listed below in the
proper cells in the following table.
Credit
Debit
Goods / Merchandise
Service
Income Payment/Receipt
Unilateral Transfers
Capital Account
Official Reserve
2. Based on the transaction amounts, please calculate the following Balance of
Payment accounts:
Balance of Trade
Current Account Balance
Capital Account Balance
List of transactions
a. Payment of $20 million in Social Security to US citizens living in Costa Rica
b. Sale overseas of Elvis Presley CDs valued at $15 million.
c. Tuition receipts of $30 million by American universities from foreign students.
d. Payment of $8 million consulting fees to Arthur Andersen by a Mexican firm
e. Sale of a $100 million Eurobond issue in London by IBM.
f. Payment of $10 million in interest by IBM to its Eurobond investors in London
g. Purchase by TI of memory chips valued at $60 million from Toshiba, in Japan.
h. Purchase of $25 million in East European stocks by Fidelity Investments (USA).
i. Fidelity receives $5 million in dividends from its East European stock investment
j. US Federal Reserve sells $20 million of Japanese bonds
k. US Federal Reserve buys $30 million of Japanese yen
BOP Practice Problems Set #2
1. Please enter the numbers associated with each transaction listed below in the
proper cells in the following table.
Credit
Debit
Goods / Merchandise
Service
Income Payment/Receipt
Unilateral Transfers
Capital Account
Official Reserve
2. Based on the transaction amounts, please calculate the following Balance of
Payment accounts:
Balance of Trade
Current Account
Balance
Capital Account
Balance
List of transactions
1.Purchase of $35 million in Japanese bonds by Vangaurd (USA).
2. A $25 million US aid to Bosnia
3.$45 million sales by All State Insurance in France
4.Purchase by HP of components valued at $65 million from Hyndai, in Korea.
5. Payment of $10 million in dividends by GE to its investors in Frankfurt
6. A $120 million stock issue in Frankfurt by GE.
7. Purchase of $50 million French Francs by the US Federal Reserve
8. Purchase of $60 million in Japanese Govt Bonds by the US Federal Reserve
9. Foreign tourists spending $15 million in New Orleans
10. Sale of Star Wars DVD, valued at $55 million, in China.
Economic Effects of Balance of Payment Changes: A Summary
US
exports to
foreign
country
Foreign
imports
from US
US export
US import
US imports
from foreign
country
Foreign
exports
to US
US BOT with
foreign
country
US trade deficit
with foreign
country
US inflation is higher than foreign inflation
US inflation is lower than foreign inflation
US GNP increasing, foreign GNP constant
US GNP decreasing, foreign GNP constant
US dollar appreciates / foreign currency depreciates
US dollar depreciates / foreign currency appreciates
US Govt increases tariffs on foreign goods
US Govt decreases tariffs on foreign goods
Foreign Govt increases tariffs on US
Foreign Govt decreases tariffs on US
US Govt increases quotas on foreign goods
US Govt decreases quotas on foreign goods
Foreign Govt increases quotas on US
Foreign Govt decreases quotas on US
US BOT increases = US trade deficit decreases
US BOT decreases = US trade deficit increases
US dollar
Foreign currency