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International Flow of Funds (Balance Of: Payments)
International Flow of Funds (Balance Of: Payments)
Funds (Balance of
Payments)
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The Current Account Balance
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United States: Balance of Payments ‐ Standard Components
US Dollars, Millions
This data report uses the BOP Standard Presentation format as defined in the 6th Edition of the Balance of Payments Manual (BPM6).
(‐) Indicates that a figure is zero
(...) Indicates a lack of statistical data that can be reported or calculated from underlying observations
Data Source: Balance of Payments Statistics (BOP)
Data extracted from IMF Data Warehouse on: 5/6/2015 5:08:23 PM
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Financial Account Balance
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International Trade Flows
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Trade Agreements
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Trade Disagreements
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Trade Disagreements
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Factors Affecting
International Trade Flows
• Impact of Inflation
• A relative increase in a country’s inflation rate will
worsen its current account, as imports increase and
exports decrease.
• Impact of National Income
• A relative increase in a country’s income level
will worsen its current account, as imports
increase.
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Factors Affecting
International Trade Flows
• Impact of Government Restrictions
• A government may reduce its country’s imports by
imposing a tariff on imported goods, or by enforcing
a quota.
• Some trade restrictions may be imposed on certain
products for health and safety reasons.
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Factors Affecting
International Trade Flows
• Impact of Exchange Rates
• If a country’s currency begins to rise in value, its
current account balance will worsen as imports
increase and exports decrease.
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Correcting
A Balance of Trade Deficit
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Why a Weak Home Currency Is
Not a Perfect Solution
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The J-Curve Effect
U.S. Trade Balance
0 Time
J Curve
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Factors Affecting DFI
• Changes in Restrictions
• New opportunities may arise from the removal of
government barriers (deregulation).
• Privatization
• DFI is stimulated by the selling of public assets
(government/state enterprises).
• Potential Economic Growth
• Countries that have higher potential for economic
growth are more attractive.
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Factors Affecting DFI
• Tax Rates
• Countries that impose relatively low tax rates on
corporate earnings are more likely to attract
DFI.
• Exchange Rates
• Firms typically prefer to invest in countries where the
local currency is expected to strengthen against
their own.
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Factors Affecting
International Portfolio Investment
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Agencies that Facilitate
International Flows
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Agencies that Facilitate
International Flows
• World Bank
• The International Bank for Reconstruction and
Development (IBRD) provides market-based loans to
countries seek to enhance their economic development.
• In particular, its Structural Adjustment Loans (SALs) are
intended to enhance a country’s long-term economic
growth/competitiveness.
• Funds are increased through co-financing agreements with
official aid agencies, export credit agencies, and
commercial banks.
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Agencies that Facilitate
International Flows
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Agencies that Facilitate
International Flows
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Agencies that Facilitate
International Flows
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