Consider the following international transactions, assuming that you are from the UK. The structure of the
Balance of Payments (BoP), as seen in class, is reported in Table 1. Suppose that we want to input the transactions in the UK Balance of Payments. Complete Table 2 indicating how each transaction would be reported in the UK BoP, i.e. the sub account (Current/Capital/Financial account, and the additional sub-category) and the sign with which it will appear, as in the example. [HINT: remember that in the Financial Account when we “import capital”, i.e. when there is a financial inflow, it is recorded with a +, while an outflow is a minus.] (40 points – 3.6points per accounting entry)
TABLE 1. STRUCTURE OF THE BALANCE OF PAYMENTS
Current Account
Balance of Goods (exports/imports)
Balance of Services (exports/imports)
Balance of Income (receipts/expenditures)
Capital Account
(receipts/expenditures)
Financial Account
Official Reserve Assets (inflow/outflow)
Other Assets – Foreign Direct Investment, Portfolio Investment, Loans, … (inflow/outflow)
Statistical Discrepancy
TABLE 2. RECORDING INTERNATIONAL TRANSACTIONS IN THE BoP
TRANSACTION
BALANCE OF
PAYMENTS
ACCOUNT AND SIGN (+/-)
1. Export of goods to Germany.
Current Account, Balance of Goods (+)
2. Import of goods from US
3. Import of insurance from Italy
4. North-american tourits’ expenditures in the UK
5. Expenditures of UK tourists in China
6. Remittances from Indian citizens, resident in the UK
7. UK direct investments in Saudi Arabia
8. Interest received from UK investments in Argentina
9. A citizen of Morocco buys UK Government Bonds.
10. Interest payments for foreign direct investment in UK
11. A patent is bought from France with a loan
12. Humanitarian aid to Third World Countries
HARVARD REFRENCING AND IN-TEXT CITATION (VERY IMPORTANT!)