HELP! what are the effects that the bop and exchange rate have on eachother (2 Viewers)

[lizzardwizzard]

hi i have an eco assessment on assessing the mutual dependence of the bop and exchange rates can someone please help me

 

[kevin3314]

There is a diverse range of effects that can be caused by a change in e/r e.g (depreciation in a currency )
1. Exports are more internationally competitive but Imports are more expensive(BOGS Improvement)
2. The services sector will experience greater revenue from inbound tourism since it is cheaper(BOGS Improvement Again)
3. 'Valuation effect' more debt needs to be paid back because of the fall in e/r means a worsening of Net primary income
These are just a few examples to get you started but you can talk about the other components of BoP(Maybe not capital and financial account) but CA(BOGS + NPY + NSY) etc...

 

[ultra908]

Another one is increased servicing costs in terms of rent, profits, dividends and interest if exchange rates depreciate, affecting the net primary income account and worsening the CAD.
A change in the exchange rate may also affect the ease for investors to come and invest in aus, affecting the financial account.