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NZDB 225 International Trade and Finance: The Balance of Payments
NZDB 225 International Trade and Finance: The Balance of Payments
NZDB 225 International Trade and Finance: The Balance of Payments
Last class we have learnt the basic definitions, terminology, Two forms of foreign investment
and theories in the product markets. This class we mainly 1. foreign direct investment
focus on the balance of payments.
for example: a Chinese corporation opens up a company in New Zealand
What are the main differences between flow of goods and 2, foreign portfolio investment
flow of capital? foreign example: a Chinese corporation buys stock in a New Zealand
corporation.
An example is a US resident with $ 20,000 could use that
money to buy a car from Toyota, but he could instead use that both increase China net foreign investment.
money to buy stock in the Toyota corporation. The first
transaction would represent a flow of goods, whereas the Net foreign investment: The purchase of foreign assets by domestic
residents minus the purchase of domestic assets by foreigners
second would represent a flow of capital.
1
THE BALANCE OF PAYMENTS THE BALANCE OF PAYMENTS
• The current account is the sum of net income
from trade in goods and services, net factor
income (such as interest payments from abroad), Please read the text book P353 to grab
and net unilateral transfers from abroad. the direct impression of the balance of
payment.
• The capital account is one of two primary
components of the balance of payments. It
tracks the movement of funds for investments
and loans into and out of a country
2
Significant Current New Zealand Significant Current New Zealand
Agreements Agreements
Why are we hearing more about them now?
3
Significant Current New Zealand
Agreements
FTAs under negotiation