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Reading 4- Economic and financial flows in a globalized world (balance of…
Reading 4- Economic and financial flows in a globalized world
balance of payments
the capital account
records all transfers of capital to and from abroad
the financial account
records financial inflows
cover claims on liabilities
financial assets
commodities
currencies
financial capital held by central banks
the current account
imports and exports for trade in goods, transfer of money
The whole account must balance
Global imbalances are reflected in large persistent deficits or surpluses in the current, capital or financial account balances
Foreign Direct Investments
form of investment made by companies
multinational
establish plants in other countries to produce
so they can sell their products and services around the world
Multinationals
are companies that have operations in at least two different countries
important actors in the global economy
500 largest account for 25% world production and 50% world trade
portfolio investments
financial assets bought and sold
companies or individuals make financial investments in other countries
buying shares