Balance of Payments (1 Viewer)

[0bs3n3]

"Australia relies on the savings of the rest of the world to fund a current account deficit".

Which part of the Capital and Financial Account includes loans (the principal not the interest)? Is it direct investment?

My textbook (Dixon) is pretty ambiguous about this.

 

[waryap]

um... to me... I think I'd put it under OTHER INVESTMENTS

because it doesn't really lie in any of the other categories.

Direct: 10% or more invested into a company
Portfolio: Investing in a wide range of areas with small amounts, aka land, shares
Financial derivatives: Hedging
Can't remember name: foreign financial assests held by govt.
Other: Anything not included in the others... so possibly loans?

the loans has to be under the Financial part of the Capital and Financial account.

 

[BHS10]

Yeah it's under Others.

um... to me... I think I'd put it under OTHER INVESTMENTS

because it doesn't really lie in any of the other categories.

Direct: 10% or more invested into a company
Portfolio: Investing in a wide range of areas with small amounts, aka land, shares
Financial derivatives: Hedging
Can't remember name: foreign financial assests held by govt.
Other: Anything not included in the others... so possibly loans?

the loans has to be under the Financial part of the Capital and Financial account.

Reserves (for future reference)

 

[ANHVU]

"Discuss the main features of Australia's balance of payments."

any helpful suggestions?

 

[BHS10]

talk about:
the Current Account and the Capital and Financial Account
what's recorded under both accounts e.g. goods, services etc.
how both accounts must add up to equal to 0 (refer to net omissions and errors)

 

[gsweeper]

So talk about the Current Account and what it is compromised of (Balance of Goods, Balance of Services, Net Current Transfers, and Net Income) and then talk about the Capital and Financial Account and what it is compromised of (Capital Transfers, Direct Investment, Portfolio Investment, Derivatives etc.) If you need to go in-depth, you could dwell into the deeper relationship between the Current Account and the Capital and Financial Account.

 

[b00m]

"Discuss the main features of Australia's balance of payments."

any helpful suggestions?

On top of what's been said above..

Mention Australia's persistent Current Account Deficit and the reasons for this [composition of trade and a lack of domestic savings] and how this results in the need for a K + F Account Surplus to offset the large CAD=> in turn resulting in a widening CAD due to the increased servicing costs associated with large net foreign liabilities. [all foreign financial inflows require some form of return; interest for debt and dividends on equity]

I think it's essential that you mention this relationship between the CAD and the K + F surplus and how equilibirum, between the two, occurs under a freely floating exchange rate [supply $A = demand $A]

M + Y debits + K outflows = X + Y credits + K inflows
(M - X) + Y debits - Y credits = K outflows - K inflows

CAD = K + F Surplus

 

[gnrlies]

"Australia relies on the savings of the rest of the world to fund a current account deficit".

Which part of the Capital and Financial Account includes loans (the principal not the interest)? Is it direct investment?

My textbook (Dixon) is pretty ambiguous about this.

Loans fall under portfolio investment. Interest repayments are under current transfers in CA.

Regards