Transcript International Economics

International Economics
Li Yumei
Economics & Management School
of Southwest University
International Economics
Chapter 13
Balance of Payments
Organization
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13.1 Introduction
13.2 Balance of Payments Accounting Principles
13.3 The International Transactions of the United
States
13.4 Accounting Balances and Disequilibrium in
International Transactions
13.5 The Postwar Balance of Payments of the
United States
13.6 The International Investment Position of the
United States
Chapter Summary
Exercises
Internet Materials
13.1 Introduction
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The Balance of Payments
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Concept
It is a summary statement in which, in principle, all the transactions
of the residents of a nation with the residents of all other nations are
recorded during a particular period of time, usually a calendar year.
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Function
to inform the government of the international position of the nation; to
help it in its formulation of monetary, fiscal, and trade policies; to
consult the balance of payments of important trade partners in
making policy decisions; to inform the banks, firms and individuals
directly or indirectly involved in international trade and finance
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Explanation
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Summary statement: aggregation not individual for the nation
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International transaction: the exchange of goods, services or
asset between the residents of one nation and the residents of
other nations
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Residents: holding citizenship
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Time dimension: one calendar year
13.2 Balance of Payments
Accounting Principles
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Credits(贷方) and Debits (借方)
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Credit
They are those that involve the receipt of payments from
foreigners. Credit transactions are entered with a positive
sign(+).(收为贷方)
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Debit
They are those that involve the payments to foreigners. Debit
transactions are entered with a negative sign (-).(支为借方)
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Explanation
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Credits (+) transactions (receipt of payments from
foreigners) : Export of goods and services, unilateral transfers
(gifts) received from foreigners and capital inflows are credits(+)
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Debits (-) transactions (payments to foreigners) : Import of
goods and services, unilateral transfers (gifts) made to
foreigners and capital outflows are debits (-)
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Capital inflows: It can take the form of either an increase in
foreign assets (purchase foreign stocks) in the nation or a
reduction (sell foreign stocks) in the nation’s assets abroad
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Capital outflows: It can take the form of either an increase in
the nation’s foreign assets (purchase foreign stocks) abroad or
a reduction (sell foreign stocks) in the nation’s assets abroad
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Double-Entry Bookkeeping
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Concept
It means that each international transaction is recorded twice,
once as a credit and once a debit of an equal amount. This is
because in general every transaction has two sides. Total
debits equal total credits.
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Examples
Textbook: page from 432-433
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Problems
Textbook: 1-8 page 449-450
13.3 The International Transactions
of the United States
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Case Study 13-1(page 435)
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The major Goods Exports and Imports of the
United States
Exports of goods, services, and income
Imports of goods, services, and income
Unilateral transfer, net
US-Owned assets abroad
Foreign-owned assets in the US, net
Allocation of special drawing rights
Statistical discrepancy
13.4 Accounting Balances and
Disequilibrium in International
Transactions
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Current Account & Capital Account
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Current Account
The Account that includes all sales and purchases of currently
produced goods and services, income on foreign investments,
and unilateral transfer
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Capital Account
The change in the nation’s assets abroad and foreign assets in
the nation , other than official reserve assets
 Autonomous Transactions &
Accommodating Transactions
 Autonomous Transactions （自主性交易）
International transactions that take place for business or profit
motives (except for unilateral transfers) and independently of
balance-of-payments considerations; also called above–the-lineterms.
 Accommodating transactions （调节性交易）
Transactions in official reserve assets required to balance
international transactions; also called below-the-line items.
Deficit & Surplus in the Balance
of Payment
 Deficit in the Balance of Payment
The excess of debits over credits; equal to the net credit balance
in the official reserve account, or accommodating transactions.
 Surplus in the Balance of Payment
The excess of credits over debits in the current and capital
accounts, or autonomous transactions; equal to the net debit
balance in the official reserve account, or accommodating
transactions.
13.5 The Postwar Balance of
Payments of the United States
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Current Account
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Positive trade balance on goods of the 1960s and
negative trade balance in 1970s, very large after 1982
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Official Reserve Balance
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First large balance deficit in 1970, in 1996 all-time-highbalance of-payments deficit (positive official settlements
represents a deficit in international transactions, while
negative balance represents a surplus
 Case Studies of U.S. Balance
with its major trading partners
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Case 1: The U.S. Trade Deficit with Japan
FIGURE 13-1 The U.S. Trade Balance with Japan in Goods and in Goods and
Services, 1980-2001.
 Case Studies of U.S. Balance with
its major trading partners
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Case 2: The U.S. Trade Deficit with China
FIGURE 13-2 U.S. Exports, Imports, and Net Trade Balance in Goods with
China, 1985-2001 (billions of dollars).
13.6 The International Investment
Position o f the United States
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Concept of International Investment
Position
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It measures the total amount and the distribution of a
nation’s assets abroad and foreign assets in the nation
at the end of the year. The balance of payments
represents a flow concept(流量), and the international
investment position represents a stock concept (存量）
It can be used to project the future flow of income or
earnings from the nation’s foreign investments and the
flow of payments on foreign investments in the nation.
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 USA International Investment Position
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Two different measures: one the values foreign direct
investments at current costs, the other the values foreign
direct investments at market prices
Net international investment position with foreign direct
investment measured at current cost, deteriorated sharply
from 1980 to 1985, 1990, 1995, at the end of 2001 (see page
445 table 13.5)
U.S.,-owned assets abroad increased 6.6 times form 1980 to
2001
Conclusion: net debtor nation between 1985 and 1990; rapid
rise in foreign holdings of U.S. securities and bank claims
resulted primarily from higher interest rates and greater
political stability in U.S. than abroad and half of federal
budget deficit during the mid-1980s
Chapter Summary
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Concept of the balance of payments
International transactions: credit or debit
transactions
Accounting balances and Disequilibrium in
international transactions
U.S. balance of payments and with its major trading
partners
International investment position, or balance of
indebtedness, measures the total amount an
distribution of a nation’s assets abroad and foreign
assets in the nation at year end
Exercises: Additional Reading
U.S.- China trade problem, see:
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Federal Reserve Bank of New York, “The Growing U.S.
Trade Imbalance with China”, Current Issues in Economics
and Finance (New York, Mary 1997)
U.S.- Japan trade problems, see:
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D.Salvatore, The Japanese Trade Challenge and the U.S.
response (Washington, D.C.: Economic Policy Institute,
1990)
L.D’Andrea Tyson, Who’s Bashing Whom? Trade Conflict
in High-Technology Industries (Washington, D.C.: Institute
for International Economics, 1992)
Internet Materials
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http://www.bea.doc.gov by clicking
“international data”
http://webhost.bridgew.edu.baten
http://www.bea.doc.gov/bea/pubs.html
http://w3.access.gpo.gov/usbudget/fy2003/pd
f/2002-erp.pdf
http://www.unctad.org/en/docs/wir99ove.pdf
http://www.oecd.org