ADDITIONAL MATERIAL ON CHAPTER 121
Balance of Payments (BOP)
BOP = [Current Account Balance] + [Capital & Financial Account Balance] + [Net Errors & Omissions]
Balance of Payments Statistics of Turkey
ANALYTIC PRESENTATION (Million US
Dollars)
2008
ACURRENT ACCOUNT
-41.947
1.
Goods: exports f.o.b.
140.799
2.
Goods: imports f.o.b.
-193.821
Balance on Goods
-53.022
3.
Services: credit
34.824
4.
Services: debit
-17.703
Balance on Goods and Services
-35.901
5.
Income: credit
6.889
6.
Income: debit
-15.048
Balance on Goods, Services and Income
-44.060
7.
Current Transfers
2.113
B.
CAPITAL ACCOUNT
0
C.
FINANCIAL ACCOUNT
33.536
8.
Direct Investment abroad
-2.549
9.
Direct Investment in Turkey
18.269
10.
Portfolio Investment-Assets
-1.276
11.
Portfolio Investment-Liabilities
-3.770
11.1.
Equity Securities
716
11.2.
Debt Securities
-4.486
12.
Other Investment-Assets
-10.930
12.1.
Monetary Authority
2
12.2.
General Government
0
12.3.
Banks
-9.159
12.4.
Other Sectors
-1.773
13.
Other Investment-Liabilities
33.792
13.1.
Monetary Authority
-1.791
13.2.
General Government
1.742
13.3.
Banks
8.195
13.4.
Other Sectors
25.646
Current, Capital and Financial Accounts
-8.411
D.
NET ERRORS AND OMISSIONS
5.653
GENERAL BALANCE
-2.758
E.
Reserve Assets
2.758
14.
Official Reserves
1.057
15.
Use of Fund Credit and Loans
1.701
Source: Central Bank of the Republic of Turkey
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2009
-13.854
109.672
-134.401
-24.729
32.752
-16.533
-8.510
5.178
-12.824
-16.156
2.302
0
6.208
-1.571
7.597
-2.740
2.938
2.827
111
4.132
-306
0
5.841
-1.403
-4.148
-901
1.598
3.849
-8.694
-7.646
8.437
791
-791
-111
-680
All definitions are taken from the Central Bank of the Republic of Turkey (CBRT).
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The balance of payments is a statistical statement that systematically records all the economic
transactions between residents of a country (Central Government, monetary authority, banks, other
sector) and nonresidents for a specific time period.
The current account covers all transactions that involve real sources (goods, services, income) and current
transfers.
The capital and financial accounts show how international purcahses and sales of assets are financed (by
means of capital transfer or investment in financial instruments).
The capital account consists of capital transfers (such as debt forgiveness, migrants’ transfers) and
non-produced, non-financial assets (acquisition/disposal of non-produced assets, like land and
acquisition/ disposal of intangible assets, like patents and copyrights)
The financial account consists of transactions in the external assets and liabilities of an economy.
International short and long-term financial flows of private and public sector are followed under this
account.
The net errors and omissions item shows the difference between the the “Current Account” and the
“Capital and Financial Account”. The collection of data from different sources leads to differences in
valuation, measurement and time of recording; as a result, these differences are reflected in this residual
item.
Note that in the above BOP table,
General Balance = Reserve Assets
This corresponds to the definition “the increase in official reserves is also called the overall balance of
payments surplus” (on page 282 of your text book).
Balance of Payments Surplus = Increase in Official Exchange Reserves
Balance of Payments Deficit = Decrease in Official Exchange Reserves
General Balance in 2008 = - 2.758 means that there is BOP deficit of about 2,8 billion US dollars, which
corresponds to the same amount of a decrease in official exchange reserves (or reserve assets).
General Balance in 2009 = 791 means that there is BOP surplus of about 791 million US dollars, which
corresponds to the same amount of an increase in official exchange reserves (or reserve assets).
Real Effective Exchange Rate
The weighted average value of a country's currency relative to all major currencies being traded within a
pool of currencies. The weights are determined by the importance a home country places on all other
currencies traded within the pool, as measured by the balance of trade.
The real effective exchange rate (REER) obtained by deflating the nominal effective exchange rate with
price indices is one of the most commonly used indicators of international competitiveness. According to
the definition used by International Monetary Fund (IMF), the real effective exchange rate is computed as
the weighted geometric average of the price of the domestic country relative to the prices of its trade
partners. The real effective exchange rate can be expressed as:
2
𝑛
𝑊0𝑗
𝑃0 𝑅0
𝑅𝐸𝐸𝑅 = ∏ (
)
𝑃𝑗 𝑅𝑗
𝑗=1
where, P0 Turkey’s price index, R0 nominal exchange rate of Turkish Lira in US dollars, Pj price index of
country j, Rj nominal exchange rate of country j’s currency in US dollars, W0j country j’s weight for Turkey.
Consumer Price Index (CPI) based real effective exchange rate index is calculated using the IMF weights
for 19 countries including Germany, USA, Italy, France, United Kingdom, Japan, Netherlands, Belgium,
Switzerland, Austria, Spain, Canada, Korea, Sweden, Taiwan, Iran, Brazil, China and Greece.
Producers Price Index (PPI) based real effective exchange rate index is calculated using the IMF weights
for 17 countries including Germany, USA, Italy, France, United Kingdom, Japan, Netherlands, Belgium,
Switzerland, Austria, Spain, Canada, Korea, Sweden, Iran, Brazil and Greece.
An increase in these indices denotes an appreciation of the domestic currecy.
Effective Exchange Rate Index (Real) (1995=100)
200
180
160
140
120
100
80
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