Talk:Balance of payments

merge

I removed this merger tag: merge|http://en.wikipedia.org/wiki/Balance-of-payments Why merge with pages that do not and should not exist?? --Michaël 12:44, 22 January 2006 (UTC)[reply]

comments

What happened to the United States balance of payments? Please explain yourself before removing text.--Jerryseinfeld 21:56, 29 Jan 2005 (UTC)

"The balance of payments is a measure of the payments that flow from one country to another." Are you sure? The balance of payments is generally understood to be the payments in and out of one particular country. The balance is between payments to all other countries and payments from all other countries. James James 04:32, 23 September 2005 (UTC)[reply]

Oil?

"Some consider the system today to be based on oil, a universally desirable commodity due to the dependence of so much infrastructural capital on oil supply. Since OPEC prices oil in US dollars, the US dollar remains a reserve currency, but is increasingly challenged by the euro, and to some degree the Japanese yen."

This is incorrect, I believe. I don't know of any responsible economists who say that the balance of payments today is "based on oil". Please cite sources?

And it is not true that the US dollar remains a reserve currency, "since OPEC prices oil in US dollars". The US dollar is a reserve currency primarily because it is a "refuge" from economic and political uncertainty elsewhere. The euro and the yen both have challenged that, but have proven themselves to be comparatively unstable recently, so forex "refuge" funds have remained in the dollar. Pricing oil or any other commodity in any other currency would not alter this, in fact would only reflect a change: oil is priced in dollars, still, precisely because the dollar is economically and politically stable. The reasoning is the reverse.

--Kessler 23:43, 27 September 2005 (UTC)[reply]

in fact, compared to the euro, the dollar is now quite unstable. —The preceding unsigned comment was added by 193.198.8.211 (talk) 13:53, 18 January 2007 (UTC).[reply]

No surpluses or deficits in a balance

"For a country to have a zero balance of payments, a current account deficit must be balanced by a capital account surplus."

This statement is wrong. Per definition, a balance cannot have a surplus or a deficit. In terms of the balance of payments the sum of current account and capital account equals the foreign reserves.

See also: Mishkin, Frederic S., 2004, The Economics of Money, Banking, and Financial Marktes 7th Edition, p.468: "Because the balance of payments must balance, the official reserve transactions balance, which equals the current account plus the capital account, tells us the net amount of international reserves that must move between governments (as represented by their central banks) to finance international transactions."

--Andreas Vester 10:42, 7 November 2005 (UTC)[reply]

Macroeconomic implications

could someone explain the importance of the BOP? What exactly is being paid for? imports alone? what about remittances? how does it effects the exchange rate?

am I just not understanding the economics?

If its not clear to me I figure there is something lacking in the article itself.

--P Funk 17:20, 3 February 2006 (UTC)[reply]

BoP=Zero

I just added some text about how it could not equal zero. I've always been taught that it had to but I also know the real world involves strangeness that models don't. Still, I emphasized that it equals zero in the theory and in general. I'm currently studying for my final exam in macro this May so as I learn more I'll smooth out the article.

By the way, what's the source on that map? --David Youngberg 18:58, 14 April 2006 (UTC)[reply]

Thanks to recent edits, someone clarified that the map doesn't refer to the balance of payments, but the balance of trade, which makes more sense because now we aren't so worried about the bop not equaling zero and confusing the reader. However, shouldn't this map be at the bot article and not the bop? --David Youngberg 18:00, 21 April 2006 (UTC)[reply]

I was under the impression that the map showed those with current account deficits thus requiring borrowings from overseas. I suppose economics is all a knock-on effect so CAD = BoT. --Rchan89 14:17, 25 February 2007 (UTC)[reply]

Could we have how governments could control their balance of payments?

Please MrDark 09:02, 29 April 2006 (UTC)[reply]

Ive done some of it

I think you're confusing balance of payments with balance of trade. It is possible, however, to have a deficit with balance of payments but there must be some kind of distortionary restriction. For example, from Macroeconomics 2nd ed (DeLong, Olney) "Thus under a gold standard, countries that run persistent balance of payments deficits--losing gold--must eventually raise interest rates to stay on the gold standard. However, surplus countries--those gaining gold--face no symmetrical crisis in which they must lower interest to stay on the gold standard....they can keep interest rates constant and watch their gold reserves grow." (p442)

Asymmetries (fixed exchanges rates, extensive capital restrictions, whatever) put pressure on the global economy, meaning governments must adjust because of the rules they put in place. If I recall correctly, in the modern era such asymmetries are rare and thus "correcting" the balance of payments is a misnomer. This needs to be made clear in the article. David Youngberg 02:29, 30 April 2006 (UTC)[reply]

I'll assume your right, because I don't understand. So you can make the required changes or just delete it :P MrDark 09:44, 1 May 2006 (UTC)[reply]

US-specific Terminology

The first line in the Overview section mentions "our dollar". This appears to be U.S. specific. Would it be better to replace it with "a country's currency", "the currency of a particular country" or something similar? Feel free to make the change and then delete this section. Colin MacLaurin 11:02, 12 July 2006 (UTC)[reply]

Thanks to whoever fixed it. The language is much more neutral now. Colin MacLaurin 04:58, 20 July 2006 (UTC)[reply]

interpretations of Official Reserve Account- backwards?

I believe the following interpretation of changes in official reserves is backwards:

"In general, net increases in the Official Reserve Account will indicate that a country is buying its' currency to try to keep the price dear from the perspective of whatever resource is being sold to acquire the currency. Countries with net decreases in the Official Reserve Account are usually attempting to keep the price of their currency cheap relative to whatever resource they are purchasing in exchange for the currency."

If official reserves increase, that would indicate that a country is selling its own currency and buying another- not the other way around, as described in the article. This would result in reducing the value of the country's own currency (that it is selling).

In the opposite case, where official reserves decrease, the country is buying back its own currency with reserves, increasing the value of its own currency.

This interpretation makes sense, because countries with overvalued fixed exchange rates run into problems where they run out of official reserves in an attempt to keep their exchange rates at their overvalued level. Like in the case of Argentina in the late 1990s and countless other examples.

Somebody please correct me if I'm wrong, or edit the article! It's been too long since my international monetary system class for me to be absolutely certain. I'm only 85% certain.

I think you're right. The "reserves" are reserves of foreign currency, so if the reserves increase, as you said, domestic currency has been sold to purchase foreign exchange. If domestic currency is sold, the value decreases. Whew - I noticed that as being odd as well, and thought maybe I was going crazy. MrHumperdink 01:18, 6 November 2006 (UTC)[reply]

Capital account surplus

I think it is misleading to describe the situation where liabilities rise faster than assets as a surplus. Wouldn't something "net capital inflows" be better? --Henrygb 12:22, 12 December 2006 (UTC)[reply]

Agree I concur, but it is technically correct. --Rchan89 14:17, 25 February 2007 (UTC)[reply]