BALANCE OF
PAYMENT
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 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 Payment
• Balance of payment takes into
account both the invisible and visible
items.
Components Of BOP
• Current Account
• Capital Account
Current Account
• The current account refers to balance
in flow of goods and services and
other current receipts and payments.
Capital Account
• Export and Import of capital and the
difference between the two represent
countries capital account balance
Eg Foreign investment and loans
BOP Disequilibrium-Factors
Disequilibrium occurs due to deficit
and surplus.
• Economic factors
• Political Factors
• Social Factors
CONCLUSION
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