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International Finance - Coggle Diagram
International Finance
Balance-of-Payments Accounts
Capital Account
includes capital transfers and acquisitions and disposals of non-produced, nonfinancial assets between U.S. residents and foreigners.
Capital transfers, unlike current transfers (i.e., secondary income), involve change of ownership, acquisition, or disposal of an asset and tend to be large and infrequent.
Non-produced, nonfinancial assets include natural resources such as land, mineral rights, and air space; marketing assets such as brand and domain names; and contracts, leases, and licenses.
Financial Account
Portfolio investment
Mostly represents sales and purchases of foreign financial assets such as stocks and bonds that do not involve a transfer of control.
Other investment
Includes transactions in currency, bank deposits, trade credits, and so forth. These investments are quite sensitive to both changes in relative interest rates between countries and the anticipated change in the exchange rate.
Foreign Direct investment
Direct investment occurs when the investor acquires a measure of control of the foreign business.
Current Account
Services
Primary income
Goods trade
Secondary income
Official Reserve Account
Official reserve assets include gold, foreign exchanges, and SDRs, or borrow anew from foreign central banks.
The official reserve account includes transactions undertaken by the authorities to finance the overall balance and intervene in foreign exchange markets.
The Balance-ofPayments Identity
BCA + BKA + BFA = - BRA
BCA + BKA = - BFA
BCA + BKA + BFA + BRA = 0
Balance-of-Payments Accounting
The balance of payments can be formally defined as the statistical record of a country’s international transactions over a certain period of time presented in the form of double-entry bookkeeping.
Balance-of-Payments Trends in Major Countries
Considering the significant attention that balance of payments data receive in the news media, it is useful to closely examine balance of payments trends in some of the major countries.