OH10G Balance of International Indebtedness (BID) . . . measures the amount a country has lent to, or borrowed from the ROW ! A positive number implies the country is a net creditor ! A negative number implies the country is a net debtor BOP related to BID1 BOP is a “flow variable.” “Flow” variables measure change over time Common flow variables include: . ! speed - miles per hour ! wage - dollars per hour ! diet - Calories per day BID is a “stock variable.” “Stock variables” measure the size at a point in time. Common stock variables include ! height - feet/inches ! weight - pounds ! wealth - dollars Current Account Balance and the BID ! Each year, the CA balance is added to the BID. ! A CA deficit equals the amount a country borrows from ROW ! A CA surplus equals the amount a country .lends to ROW . Example 2 Date 2000 2001 2002 2003 2004 2005 1 2 BID 800b 850b 750b 450b - 50b -250b CA bal. 50b -100b -300b -500b -200b Country starts as net creditor Country becomes net debtor Analogous to relationship between automobile speedometer (AC bal) and odometer (BID) BID is measured on January 1st and CA bal is measured from January 1st to December 31st.