BALANCE OF OF PAYMENTS
Learni ngOb Obj ect i ves: 1. Descr i bet hecomp mponent soft hebal anceofpayment s; 2. I dent i f yt hedi ffer entt ypesofi mbal ancewi t hi nt hebal anceofpayme ment s; 3. Expl ai nt hec ause sofi mbal ance swi t hi nt hebal anceofpayme ment s; 4. I dent i f yt hepol i cyme measur esf orcor r ect i ngi mbal ancewi t hi nt hebal anceof payment s. Dur i ngagi venyear ,Jama mai cansl i kenat i onal sofot hercount ri es,engagei navastnumber andvari et yoft ransact i onswi t hr esi dent sofot hercount ri es.Theyi mport ,export ,engage i nservi cet r ansact i ons,r ecei veorsendgi f t sabr oad,obt ai nneti ncome mef r om overseas, r ecei vel oansorma makepayme ment sonl oansr ecei vedandunder t akeorr ecei vef ore i gn i nvest ment . Al lt heset r ansact i onst oget hercompr i set hei nt er nat i onalt r adeandpayme nt sof Jamai ca.Howev er ,t oanal yz eandeval uat et heset r ansact i onst heymustbecl assi fiedand aggr egat edt oma makeaBal anceofPayme ment s( BOP)st at eme ment . TheBal anceofPayme ment si sasummar yofal lec onomi mi c t r ans ac t i o nsbe t we e ndo me me s t i candf o r e i g nr e s i de nt sdur i ng ag i v enpe r i o do ft i me ,us ual l yo neye ar .
Themai npur poseofkeepi ngt heser ecor dsi st oi nf or m gov er nme ntaut hor i t i esoft he overal li nt ernat i onaleconomi mi cposi t i on oft hecount ryi nordert oassi stt hem i narr i vi ng atdeci si onsonmonet aryandfiscalpol i cy ,ont heonehand,andt r adeandpayme ment s pol i cyon t heot her .Bal anceofpayment sst at i st i csar et her ef orehel pf ult ogovernment aut hori t i eschargedwi wi t hmai nt ai ni ngma macroeconomi mi cst abi l i t y. Pr i nci pl esandConcept s
Bal anceofpayme ment saccount i ngi sgover nedbyasetofpr i nci pl esandconvent i onst hat ensur est hesyst ema mat i candcoher entr ecordi ngoft r ansact i ons,whi chareconsi st ent acrosscount ri esandovert i me.Thesepr i nci pl esandconcept swi wi l lbedi scussedand wher enecessar ypr act i calexampl eswi l lbeusedt oexpl ai nt heconcept s.Theyar e: 1. 2. 3. 4. 1.
Doubl eEnt r ySyst em ConceptofEconomi mi ct er r i t or yandResi dence Val uat i onsandTi meofRecor di ng ConceptofEconomi mi cTr ansact i ons
Doubl eEnt rySys t em
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Thebal anceofpayme nt si sconst r uct edaccor di ngt ot hepr i nci pl esofdoubl eent r y bookkeepi ng.Undert hi ssyst em at r ansact i oni sr epr esent edi nt hebal anceofpayme ntby t woent ri eswi t hequalval ues.Oneoft heseent ri esi sdesi gnat edacr edi tandt heot hera d e b i t . Ther ear esomebasi cr ul esgover ni nghow ent r i esar er ecor dedi nt hebal anceof payment s.Acr edi tent ryi sr ecordedwhent het r ansact i ongi vesri set oar ecei ptbya domest i cr esi dentf r om af orei gnr esi dent .Ther ecei pti t sel fmayt aket hef orm ofan i ncreasei nt heresi dent ' sf or ei gn assetsorbal ancesoff orei gn curr enci es.What everi t s f orm,t herecei pti srecordedasadebi tent ry.Conversel y,anyt ransact i on t hatgi vesri se t oapaymentbyaresi dentt oaf orei gnr esi denti sr ecorded asadebi tent ry .Thepayment t hatr esul t sf r om t hi st ransact i on i srecordedasacredi tent ry . Thedoubl eent r yappr oachcanbedemonst r at edwi t hsomehypot het i calexampl es. Exampl e1 LetusassumeAl coa,ami ni ngc ompanyi nJamai caexpor t sUS$2. 0m wor t hofbauxi t et o Ji mpexacompanyi nt heUSAandJi mpexpaysf ort hebauxi t ebydeposi t i ngUS$2. 0m t o Al coa' sbankaccount .Tabl e1showst heent r i est hatwoul dbemadei nJamai ca' s bal anceofpayme nt s:
Export swi l lappearasacr edi tent rybecauset heygi ver i set orecei pt sf r om abr oadand t her ecei pt ,whi chr epr esent sacl ai m onnonr esi dent s,appearsasadebi tent ryi nt he financi alaccount . Conversel y,i mport soff orei gngoodsandservi ceswi l lappearasdebi t si nt hebal anceof payment sast heset r ansact i onsgi ver i set opayment st ot her estoft heworl d.The correspondi ngpayment s,whi chr esul t edf r om t hei ncreasei nl i abi l i t i est of orei gners,ar e r ecordedascr edi tent ri es. Toi l l ust r at e,l etusassumeJamai cai mpor t sUS$150mi l l i onwor t hofoi l .I nt hebal ance ofpayment sofJamai ca( seetabl e2)t heoi li mporti srecordedasadebi tent ry ,asi tgi ves r i set oapaymentbyares i dentt oanonr esi dent .Thecor r espondi ngpayment ,whi ch r esul t edf rom t hei ncreasei nJamai ca' sl i abi l i t i est of orei gners,i srecordedasacredi t ent ry.
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Exampl e2 Letusnow assumet hatJamai caborr owsUS$100mi l l i ondol l ar sf r om t heWor l dBank andt heproce edsoft hel oansar edeposi t edatt heBankofJamai ca( BOJ) .Tabl e3shows t heent r i est hatwoul dbemadei nJamai ca' sbal anceofpayment s: Table 3
Thel oan,whi chgi vesr i set oar ecei pti sr ecor dedi nt hebal anceofpayme nt sofJamai ca asacredi tent ryandt heact ualpr oceedsf r om t hel oans-t hef orei gncurr encyrecei pt -i s r ecor dedasadebi tent ry . I fal lt hepri nci pl esoft heBOPmanualareadher edt ot hent hesum ofal lt hecr edi t ent ri esshoul dbei dent i calt ot hesum ofal lt hedebi tent ri esandt henetbal anceofal l ent ri esi nt heBOPst at ement ,i ncl udi ngchangesi nt her eser vesoft heCent r alBank, shoul dbezer o.I npr act i ce,however ,whenal lt heact ualent ri esaresummedt her esul t i ng bal ancewi l li nvar i abl yshow anetcr edi toranetdebi t .Thatbal ancei st her esul tof i ncompl et ecoverageoft r ansact i ons,useofnonuni f orm pri cesandi nconsi st entt i mesof r ecordi ngandconver si onpr act i ces. Thecus t om i nBOPaccount i ngi st oshow t hene tbal anceofal lt heact ualt r ansact i onsas " neterr orsandomi ssi ons" .Thi sent ryi sequalt ot hedi fferencei nt hecr edi tanddebi t ent ri es,butwi t ht hesi gnr ever sed.Thusi ft hebal anceoft her ecordedcomponent si sa cr edi t ,t hei t em f orneter r orsandomi ssi onswoul dbeshownasadebi tofequalval ueand vi cev er sa.
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Thecus t om i nBOPaccount i ngi st oshow t hene tbal anceofal lt heact ualt r ansact i onsas " neterr orsandomi ssi ons" .Thi sent ryi sequalt ot hedi fferencei nt hecr edi tanddebi t ent ri es,butwi t ht hesi gnr ever sed.Thusi ft hebal anceoft her ecordedcomponent si sa cr edi t ,t hei t em f orneter r orsandomi ssi onswoul dbeshownasadebi tofequalval ueand vi cev er sa. Rel at i vel yl argeandper si st entneterr orsandomi ssi onsar ecausef orconcernast heyar e i ndi cat i veofst at i st i calerr or ,maj ordi screpanci esori mproperl yrecordedi nf ormat i on. 2.
Conce ptofEconomi cTer r i t or yandRes i dence
Thei dent i ficat i onoft r ansact i onsbet weenr esi dent sandnonr esi dent sunder pi nst he bal anceofpayme ntcompi l at i onpr ocess.Forbal anceofpayme nt spur poses,t heconcept ofresi dencei snotbasedon nat i onal i t yorl egalcri t eri abutrat heront het ransact or' s cent r eofeconomi ci nt erest .Ofi mport ancet ooi st henecessi t yt oi dent i f yt heeconomi c t erri t oryoft hecount ryt owhi cht heconceptofr esi dencei st obeappl i ed.Thi si ssoas t heboundari esrecogni zedf orpol i t i calpurposesmaynotnecessari l ycoi nci dewi t ht hose f oreconomi cpur poses. c ono mi ct e r r i t o r y Acount r y' se consi st sofageogr aphi car ea,admi ni st er edbya government .I naddi t i on t oi ncl udi ngt heai rspace,andt erri t ori alwat ersoverwhi cht he count ryhasj uri sdi ct i on,t heeconomi ct erri t oryofacount ryal soi ncl udest erri t ori al encl avesi nt herestoft heworl d.Theseencl avesar ecl ear l yi dent i fiedar easl ocat edi n ot hercount ri est hatar eownedorr ent edbygovernment sf ordi pl omat i c,mi l i t ary, sci ent i ficorot herpur poses,wi t ht heagr eementoft hecount rywher et hel andareai s l ocat ed.Sof orexampl e,t heJamai canembassyi nWashi ngt onDC i sr egar dedasapar tof t heeconomi ct er r i t oryofJamai ca.Si mi l ar l yGuant anomoBayi nCubai sapartoft he ec onomi ct er r i t oryoft heUSAasi st heUSEmbass yi nJamai ca.
Theconceptofr esi dencei sdefinedbr oadl yt oi ncl udet womai nt ypesofi nst i t ut i onal uni t s : ( 1) ( 2)
househol dsandi ndi vi dual st hatcompr i seahousehol dand t hel egalandsoci alent i t i esoft hateconomysuchast hegovernment ,and ent er pr i ses( pr ofitandnonpr ofit )oper at i ngi nt heeconomy ,whet herf or ei gnowned ornot .
Asf arasi ndi vi dual sar econcer ned,t heconceptofr esi dencei sbasedmai nl yont he pr i nc i pl eof" c ent r eofi nt e r e s t " .I ti sge ne r al l yac ce pt e dt hati fape r s onr e s i de sf ormor e t hanayeari nagi veneconomy ,heorshei sconsi der edt obear esi dentoft hateconomy . Soi faJamai canr esi dentl eavesJamai caandr et urnst ohi s/herhousehol dwi t hi nayear , t hei ndi vi dualcont i nuest obear esi denteveni fheorshemakesf r equentt ri psout si de Jamai ca.Thei ndi vi dual ' scent r eofeconomi ci nt er estr emai nsi nt heeconomyi nwhi ch
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t hehousehol di sresi dent .I nt hesamevei n,t ouri st sar eresi dent soft hecount ryf r om whi cht heycomer at hert hant hecount r yt heyar evi si t i ng. However ,t her ear eexcept i onalci r cumst anceswher ebyi ndi vi dual sar ereg ardedas r esi dent s,f orBOPpurposes,event hought heyr esi deout si deoft hei rcount ryf ormore t hanayear . a.
St udent ss houl dbet r eat edasr esi dent soft hei rcount ri esofori gi nhoweverl ong
t heys t udyabr oad,asl ongast heyr emai nmember sofhouse hol dsi nt hei rhome count ri es. b.
Mi l i t ar ype r s onne landc i v i ls er v ant s ,i nc l udi ngdi pl o mat sempl oy edabr oadi n
gover nmentencl avesar eal lr egar dedasresi dent soft hecount ryf r om whi cht hey ori gi nat east hoseencl avesf orm partoft heeconomyoft heempl oyi nggover nment . Thegover nme ntempl oyeeswor ki ngi nt heseencl avescont i nuet ohav ecent r esof economi ci nt er esti nt hei rcount ri esofori gi nf orhoweverl ongt heyworki nt he encl aves.Ther ef orei faJamai can di pl omat /ci vi lservanti spost edt otheJamai can Embassyi nWashi ngt onf ort hr eey ear st hatempl oyeecont i nuest obeaJamai can r esi dentwhi l eheworksi nt heencl ave. 3. a)
Val uat i onsandTi meofRecor di ng Val uat i o n
Aconsi st entme t hodofval ui ngt r ansact i onsi sr equi r edf ort hecompi l at i onoft he bal anceofpayme nt sst at eme nt .Al lt r ansact i onsar eval uedatmar ketpr i ces.Thi s i st hepri cethatwi l l i ngbuyerspayt oacqui reagoodorservi cef r om wi l l i ngsel l ers andt heex change sar emadebet wee ni ndependentpar t i esandont hebasi sof commer ci alconsi der at i onsonl y .I nconsi st entval uat i onsl eadt odi ffer entdebi tand cr edi tent ri esbei ngmadef ort hesamet r ansact i ont husresul t i ngi n" neterr orsand omi ssi ons"i nt heBOP. b)
T i meo fRe c o r di ng
I nt hedoubl eent rysyst em oft hebal anceofpaymenti ti si mport antt hatbot h ent ri esrel at i ngt oat r ansact i onar er ecor dedatt hesamet i me.However ,whi l et hi s i sthei dealdat ar ecor di ngmet hodol ogy,i ti snotal wayspossi bl e,t husresul t i ngi n “ er r orsandomi ssi ons"i nt heBOP.Anent ryi sr ecor dedi nt hebal anceofpayment s whenat r ansact i oni nvol vesachangeofowner shi porwher eachangeofowner shi p i snotobvi oust het r ansact i on i srecordedwhent hepart i esent eri ti nt hei r accounts. 4.
Conce ptofEconomi cTr ansact i ons
Thepr i mar yconcer noft heBOPi snotconfinedt opayme nt s,ast henamewoul d suggest ,butr at herwi t ht r ansact i ons.At r ansact i on i nvol vest hechangeof owner shi pofgoodsand/orfinanci alasset s,t hepr ovi si on ofservi ces,l abourand c api t al .
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Themostnume r ousandi mpor t antt r ansact i onsi nt hebal anceofpayme nt sar e cl assi fiedasexchanges.Thi sr ef er st ot r ansact i onsi nwhi checonomi cval uesar e pr ovi dedorr ecei vedi nexchangef orot hereconomi cval ues.Theseval uesconsi stof r ealr esour ces( goods,servi cesandi ncome)andfinanci ali t ems. a)
-
b)
-
-
Tr ansact i onscl assi fiedasexchanges
Thi sf or m oft r ansact i onr equi r esat r ansact ort opr ovi deaneconomi cval ue t oanot hert r ansact orandr ecei vesi nr et urnan equalval ue.Li st edbel ow ar esomeexampl esoft hi st ypeoft r ansact i on: Pur chasesandsal esofgoodsandservi cesagai nstfinanci ali t ems-e. g.t he sal eofbauxi t ef orf orei gnexchange. Bart er-e. g.t heexchangeofbauxi t ef ormot orvehi cl es. Thei nt erc hangeoffinanci ali t emsf orot herfinanci ali t ems-e. g.t hesal eof securi t i esf ormoney. Tr ans ac t i o nsc l as s i fie dast r ans f e r s
Ther ear eal sot r ansact i onsi nwhi chat r ansact orpr ovi deaneconomi cval ue t oanot hert r ansact oranddoesnotr equi r eaneconomi cval uei nr et urn.The r equi r edoffset t i ngent ri es,i nt heBOP,f ort heset r ansact i onsar er ecor dedas t r ansf er s.Li st edbel ow aresomeexampl esoft hi st ypeoft r ansact i on: dpr oquo Thepr ovi si onoracqui si t i onofgoodsandser vi ceswi t houtaqui e. g.donat i onofmedi calsuppl i esbyUSAgove r nmentt ogover nmentof Jamai ca. dpr oquo-e Thepr ovi si onoracqui si t i onoffinanci ali t emswi t houtaqui . g. debtf orgi veness. MAJOR CATEGORI ES I N THE BALANCE OF PAYMENTS
TheBOPi sdi vi dedi nt ot womai ncat egor i esaccor di ngt ot hebr oadnat ur eoft he t r ansact i ons.Thesecat egori esar e: 1. TheCur r entAcc ount 2. TheCapi t alandFi nanci alAcc ount
1. CURRENT ACCOUNT : hecur T r entaccounti ncl udesal lt r ansact i ons( excl udi ngt hose r ecorded i nt hecapi t al& financi alaccount )bet weenr esi dentandnonr esi dentent i t i es t hatt hati nvol veeconomi cval ue.
Thi saccounti ssubdi vi dedi nt o: a.Goods b.Se r v i c e s c .NetPr oper t yI nc ome Abr oad’ )
( al soc al l ed‘ Mer c handi seTr adeBal anc e) ( al soc al l ed‘ NetFac t orI ncomef r om
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d.Cur r e ntt r ans f e r s
a.
b.
Goods:
Thi saccount sf ort hei mpor tandexpor tofgoodsort angi bl e commodi t i es.Thedi ffer encebet weenexport sandi mport soft angi bl e goodsi st het r adebal ance,somet i mescal l edt hevi si bl et r adebal ance.
Services: Thi saccount sf ort hei mpor tandexpor tofser vi ces.Ser vi ces ar eo f t e nc al l e d‘ i nv i s i bl e s ’be caus et he yar eno tt ang i bl e .I tc ov e r s t ravel ,t ransport at i onandotherservi ces.
i .
Travelcov er sgoodsandser vi cesacqui r edf r om aneconomybynonr esi dent
t ravel ersf orbusi nessandpersonalpurposesduri ngthei rvi si t s( ofl essthan oney ear ) .Expendi t ur esmadebyseasonalwor ker s( e. g.Jamai canf arm wor ker s)andt hosef oreducat i onalandheal t hr el at edpur posesmadeby st udent sandmedi calpat i ent sarer ecor dedi nt hi ssubaccount . i i .
Tr ans po r t at i o nc oversal lt ransportat i onservi ces( sea,ai randl and) ,bought
andsol d,t hati nvol vet hecarr i ageofpassenger s,movementofgoods ( f r ei ght ) ,chart erofcarri erswi t hcrew andothersupport i ngservi ces. i i i .
Ot he rS er v i c e sar eaccor dedgre atpr omi nencei nt hebal anceofpayment s
andr eflectt hegrowi ngi mport anceofi nt ernat i onalservi cesi nworl dt r ade. Ot herServi cesconsi stoft hepur chaseandsal eof : ·Communi cat i onse r vi ces ·Const r uct i onser vi ces ·I nsur ances er vi ces ·Fi nanc i alser vi ces c.
·Comput erandi nf or mat i onse r vi ces ·Roy al t i esandl i cencesf ees ·Per sonal ,cul t uralandrecr eat i onalser vi ces ·Gover nmentser vi ces
I ncome: Thi sr eflect st heneti ncomer el at edt ot hecompensat i onor r ewardt of act or sofpr oduct i onusedandr ender edbet weenone count ryandt her estoft hewor l d.
Fori nst ance,pr oduct i on mayt akepl acei nacount ry ,butt hef act ors ofpr oduct i onmaybeownedbyf orei gner s.I nt hi sscenari o,t hef act or r ewardswoul dgot hef or ei gnowner s.Ther ever sei sal sot ruewher e nat i onal sofacount ryhavest akesi nf orei gni nvest ment s. Thedi ffer encebet weenal li nflowsofi ncomeandout flow ofi ncome gi vest hei ncomebal ance,whi chi st heequi val entt ot heNetFact or I ncomef r om Abroadadj us t mentr equi r edt oconv er tGDPi nt oGNP. d.
Cur r ent
Curr entt ransf ersareuni l at eralt ransf erswi t h
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Tr ansf er s: not hi ngr ecei vedi nr et urn.I tt rackst he" oneway"t r ansf eroff unds f r om onecount r yt oanot hert hatar emadewi t houtanyexc hangeor goodsandser vi cesi nr et ur n.Thesepayment saremer el ygi f t sf r om onecount ryt oanot her .Thegi f tmi ghtcomef r om aper son,busi ness, orgov er nment .For ei gnai dpayment sf r om onegov er nmentt oanot her ar eani mport antpartofuni l at eralt ransf ers.
Thesei ncl uder emi t t ances,donat i ons,ai dsandgr ant s,offici al assi st anceandpensi ons. Now t hatwehav ecov er edt hef ourbasi ccomponent s,wenee dt ol ookatt hemat hemat i cal equat i ont hatal l owsust odet er mi newhet hert hecurr entaccounti si ndefici torsur pl us ( whet heri thasmorecr edi tordebi t ) .Thi swi l lhel pusunder st andwher eany di scr epanci esmayst em f r om,andhow r esour cesmayber es t r uct ur edi nor dert oal l ow f or abet t erf unct i oni ngeconomy .Thef ormul ai s: Cur r entAccountBal ance=X –M +NY+NCT. wher e:
X =Expor t sofgoodsandser vi ces M =I mport sofgoodsandserv i ces NY=Neti ncomeabr oad NCT=Netcurr entt r ansf er s
WhatDoest heCur r entAccountBal anceTel lUs?
Theor et i cal l y ,t hebal anceshoul dbez er o,buti nt her ealwor l dt hi si si mpr obabl e,soi f t hecurr entaccounthasadefici torasurpl us,t hi st el l sussomet hi ngaboutt hest at eof t heeconomyi nques t i on,bot honi t sownandi ncompari sont oot herwor l dmar ket s. Asur pl usi si ndi cat i veofaneconomyt hati sane tcr edi t ort ot her estoft hewor l d.I t showshow muchacount ryi ssav i ngasopposedt oi nve st i ng.Whatt hi smeansi st hatt he count ryi sprov i di nganabundanceofr esour cest oot hereconomi es,andi sowedmoneyi n r et urn.Bypr ovi di ngt heser esour cesabr oad,acount rywi t haCAB sur pl usgi ves r ecei vi ngeconomi est hechancet oi ncr easet hei rproduct i vi t ywhi l erunni ngadefici t .Thi s i sref err edt oasfinanci ngadefici t . Adefici tr eflect saneconomyt hati sane tdebt ort ot her estoft hewor l d.I ti si nv est i ng mor et han i ti ssavi ngandi susi ngr esour cesf r om ot hereconomi est omeeti t sdomest i c consumpt i onandi nve st mentr equi r ement s.Fore xampl e,l etuss ayaneconomydeci des t hati tneedst oi nvestf ort hef ut ur e( t or ecei vei nvest menti ncomei nt hel ongrun) ,so i nst eadofsavi ng,i tsendst hemoneyabr oadi nt oani nves t mentpr oj ect .Thi swoul dbe markedasadebi ti nt hefinanci alaccountoft hebal anceofpayment satt hatper i odof t i me,butwhenf ut ur er et ur nsar emade,t heywoul dbeent er edasi nves t menti ncome( a cr edi t )i nt hecurr entaccountundert hei ncomesect i on.
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Acur r entaccountdefici ti susual l yaccompani edbydepl e t i oni nf or ei gnexchangeasset s becauset hoser eser veswoul dbeusedf ori nvest me ntabr oad.Thedefici tcoul dal sosi gni f y i ncr easedf orei gni nvest menti nt hel ocalmar ket ,i nwhi chcaset hel ocaleconomyi sl i abl e t opayt hef ore i gneconomyi nves t menti ncomei nt hef ut ur e. I ti si mport antt ounder st andf r om wher eadefici torasur pl usi sst emmi ngbecause somet i mesl ooki ngatt hecur r entaccountasawhol ecoul dbemi sl eadi ng.
2. CAPI TALAND FI NANCI AL ACCOUNT:
TheCapi t alandFi nanci alAccountr ecor dst r ansact i onst hatdi r ect l yaffectt he weal t handdebtoft hecount r y .Thi saccountt r ackst heflow ofcur r encyandot her monet aryasse t susedt opur chasefinanci alandphysi calasset s.Thi spartof bal anceofpayme nt st r acksdome st i ci nvest me nti nt hef or ei gnsect orandf or ei gn i nvest menti nt hedomest i csect or . Theaccounti ssubdi vi dedi nt ot womai ncat egor i es: a.TheCapi t alAc c o unt ,and b.TheFi nanci alAcc ount
Adefici torsur pl usi nt hecapi t alaccounti smat chedbyanopposi t esur pl usordefici ti n t hecur r entaccount . t alAccount a. TheCapi Thecapi t alaccounti sequalt ocapi t alt r ansf er s,andt hesal eofnat ur aland i nt angi bl easset st of orei gnersmi nust hecapi t alt r ansf ers,andt hepur chaseof f orei gnnat ur alandi nt angi bl easset sbyacount ry’ sresi dent s.
TheCapi t alAccountcov er s ( i ) c api t alt r ans f e r sand ( i i ) t heacqui si t i on/di sposalofnonpr oduced,nonfinanci alasset s. Capi t alt ransf ers i ncl udedebtf orgi venessandmi grant s’t r ansf er s( goodsand
financi alasset saccompanyi ngmi gr ant sast heyl eaveorent ert hecount ry) .I n addi t i on,capi t alt ransf ersi ncl udethetr ansf eroft i t l et ofixedasset sandt he t ransf eroff undsl i nkedt ot hesal eoracqui si t i on offixedassets,gi f tand i nheri t ancet axes,deat hdut i es,uni nsur eddamaget ofixedasset s,andl egaci es. Capi t alt r ansf ersi ncl udethet ransf erofownershi poffixedasset s,t het r ansf erof f undsl i nkedt odi sposal /acqui si t i onoffixedasset sandt hecancel l at i onofdebtby c r edi t or s .
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Acqui si t i onanddi sposalofnonpr oduct i ve,nonfinanci alasset sr epr esent
t hesal esandpur chasesofnonpr oduct i veasset s,suchast heri ght st onat ur al r esour ces,andt hesal esandpur chasesofi nt angi bl easset s,suchaspat ent s, copyri ght s,t r ademarks,f r anchi ses,andl eases.I tal soi ncl udespur chasesand sal esofl andbyf orei gnembassi es. nanci alAccount b. TheFi Thefinanci alaccount ,asubdi vi si onoft hecapi t alaccount ,l i st st r adei nasset s suchasbusi nessfirms,bonds,st ocks,andr ealest at e.
TheFi nanci alAccountcover s ( i ) di r e c ti nv es t me nt , ( i i ) port f ol i oi nve st ment , ( i i i ) o t he ri nv e s t me nt s( t r a dec r e di t s ,l oans ,c ur r e nc i e sandde pos i t s ) ( i v) changesi nreserves. ( i )
Di r ecti nvest menti st hecat egoryofi nt ernat i onali nvest menti nwhi charesi dent
ent i t yi noneeconomyacqui r esordi sposesof10percentormoreoft heor di nary shar esorvot i ngpowerofanent er pr i sel ocat edi nanot hereconomyandhasan effect i vevoi cei nmanagement .Theresi dentent i t yi sref err edt oast hedi r ect i nvest orandt heent erpri sei st hedi r ecti nvest mentent erpri se.Thecomponent sof di r ecti nvest mentar e:equi t ycapi t al ,r ei nvest edearni ngsandi nt er companydebt t r ansact i ons. f ol i oI nves t me ntc ( i i ) Port overst ransact i onsi nequi t ysecuri t i esanddebtsecuri t i es. Wi t hr espectt oequi t yapor t f ol i oi nves t me ntwoul di mpl yl esst han10percent owner shi poft hevot i ngpowerofan ent erpri sel ocat edi nanot hercount ry .Debt sec ur i t i esi ncl udebondsandnot es,moneymar keti nst r ument sandfinanci al deri vat i ves.Theessent i alcharact eri st i coft hesei nst rument si st hatt heyare t r adabl e.Thi smeanst hesei nst rument sofferi nvest orst heflexi bi l i t yt oshi f t i nvest edcapi t alf r om onei nst rumentt oanot her .
( i i i )
Ot heri nve s t menti sar esi dualcat egorythati ncl udesal lfinanci alt r ansact i ons
notcoveredi ndi recti nvest ment ,port f ol i oi nvest mentorreserveassets.I ti ncl udes t r adecredi t s,( t hedi r ectext ensi on ofcredi tbysuppl i erst obuyersofgoodsand servi ces) ,l oanst ofinancet r ade,ot herl oansandadvancesandfinanci all eases. ( i v)
TheRes er ve sr epr esentt hef orei gnexchangewhi cht hecount ryhasavai l abl ef or
financi ngani mbal anceofpayment swi t ht her estoft hewor l d.Ani ncr easei nt he r eservesofacount ry( adebi t )i ndi cat est hatt her ewasasurpl usf r om t he r emandi ngnonr eservet r ansact i ons,i ndi cat i nganover al lsurpl usf ort hebal ance ofpayment sandvi cev er sa.
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Adi s t i nct i oni smadebet weengr ossf or ei gnr eser vesandnetf or ei gnr eserves.I n t hecaseofJamai ca,grossf orei gn r eservesrepr esentt heoffici alhol di ngsoff orei gn asset s,byt heCent r alBankandt heCent r alGover nment ,whi l egr ossf or ei gn l i abi l i t i e sar epr i nc i pal l yl i abi l i t i e soft heCe nt r alBankt ot heI nt e r nat i onal Monet aryFund( I MF) .Thedi ffer encebet weent hegr ossf or ei gnasse t sand l i abi l i t i esgi vestheneti nt ernat i onalreserveposi t i on oft hecount ry.Thi scanbe di saggregat edi nt otheneti nt ernat i onalr eservesoft heCent r alBankandt he ext er nalasset soft heCent r alGover nment . Acount r y' smonet ar yaut hor i t ynor mal l yshoul dnotper mi tr eser vehol di ngst o decr easebel ow t hel evelconsi der edmi ni mal l yappr opri at eoradequat ef ort he A headequacyofr eser v ehol di ngsi st her at i o count ry . commonmeasureoft srat i oi ssomet i mes ofr eserv easset st oi mportofgoodsandserv i ces.Thi expre sse dast henumberofweekswort hofi mport sofgoodsandser vi cest hat coul dbepai df orf r om t heofgrossr eserveasset s.Thei nt ernat i onalbenchmarkf or r eser veadequacyi s12weeksofi mport sofgoodsandser vi ces.
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MAI N SOURCES OF DATA
Ther ear et hr eemai nsour cesofdat af orcompi l i ngt hebal anceofpayme nt sofJamai ca. 1.Sur veys 2.Fo r e i g ne x c h ang er e c o r ds 3.Admi ni s t r at i v eando t he rdo c ume nt ar yso ur c e s
1.
Bal anceofpayment ss ur veysofbusi nessent erpri sesandot heror gani zat i onsar e
conduct edatl eastonceperyear .I nf ormat i oni sr equest edr egardi ngacompany' s
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t ransact i onswi t ht herestoft hewor l d.Li keal lst at i st i calsurveys,t hereare pr obl emssuchasnonr esponseandi ncompl et ecov er agef orwhi chest i mat eshave t obedone.Si ncet her epealoft heExchangeCont r olAct ,t heannualsurv eyhas beenoneoft hemai nsour cesofdat a. 2.
For ei gn exchanger ecor dsareal soausef ulsour ceofbal anceofpayment s
st at i st i cs.However ,suchr ecordsdor equi r eadj ust ment swi t hr egardt o cl assi ficat i onandt i mi ngbef oret heysat i sf yt heneedsoft hebal anceofpayment s compi l er .Manyoft hei t emsi nt heser vi cesandfinanci alaccount sarepre pared f r om consol i dat edf orei gnexchangereport srecei vedf r om t heaut hori zedf orei gn exchangedeal er s. 3. Admi t i cul ar l ythosekeptbygovernmenti nst i t ut i ons ni s t r at i ver ecor ds,par pr ovi dedat aon i t emssuchasmer chandi set r ade,f or ei gnl oansandoffici al t r ansf ers.Ext ernalt r adedat ai scompi l edbyTheSt at i st i calI nst i t ut eofJamai ca ( STATI N)f r om r ecor dsmai nt ai nedbyCust oms.Est i mat esofr ecei pt sf r om f or ei gn t r avelarederi vedf r om t henumberofvi si t orsi nvari ouscat egori escompi l edbyt he Jamai caTour i stBoar dt oget herwi t ht heaver ageexpendi t ur eofeachcat egor y .The BankofJamai cagener at esi nf ormat i onont hecount ry' sf or ei gnexchanger eser ves i nkeepi ngwi t ht heBank' sr ol eascust odi an ofsuchr eserves. OVERALLSURPLUS AND DEFI CI T OF THE BALANCE OF PAYMENTS
I ni nst anceswher et her ei sanover al lbal anceofpayment sdefici t ,t heamountoff orei gn exchangehel dbyt hecount ryi sdepl et ed.Ther ever sei sal sot rue,aswher et her ei sa bal anceofpayme nt ssur pl us,t hef or ei gnexchangehel dbyt hecount r yi ncr eases. TheCent r alBankormonet ar yaut hor i t yofacount r ykeepsamount soff or ei gnexchange i ni t svaul t sf oroffici alpurposes.Assuch,t hesef orei gncurr encyhol di ngsar ecal l ed offici alf orei gnexchanger eserves.Fori nst ance,i fgl obaldi st ur bancesduet onat ur al di sast er sorot herci r cumst ancescauseexport st obesi gni ficant l ycurt ai l ed,t hent he Cent r alBankwoul dbeabl et ousei t sf or ei gnexchanger eser vest ocoveri mport sand ot heressent i alf orei gnpayment ssuchasf orei gndebtservi ci ng. Asi ndi cat orofhow l ongt hecount r ycoul dsust ai ni t scur r entl evelofi mpor t susi ngi t s f orei gnexchangereserves,t hei mportcoverr at i oi scal cul at ed.Thi ssi mpl ydi vi dest he offici alf orei gnexchanger eservesbal ancebyt hel evelofmont hl yi mport s. I naddi t i on t othi sr ol e,f orei gnexchangereser vescan al sobeusedt omani pul at et he exchanger at e.Thi swi l lbedi scussedi nt henextt opi c:ExchangeRat es. CURRENTACCOUNT DEFI CI TS
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TheBal anceofPayme nt saccountt el l sani mpor t antst or yoft heov er al ll evelof part i ci pat i on ofacount ryi nt hei nt ernat i onalenvi r onment .I nt hecompl exworl dof i nt ernat i onalt r adeandcapi t almovement s,t her ei sasyst emat i crel at i onshi pwher e count ri esar ei nt ert wi nedbyt hei rdependenceoneachot herf orsuppl i es,market sf ort he var i ousgoodsandser vi cespr oducedandi nt er nat i onalfinance.Theheal t hoft hi s r el at i onshi pneedst obemai nt ai nedi norderf ori tt osuccessf ul l ycont i nuei nt othel ong t erm.Thi si sbecause,i facount rywoul dl i ket ocont i nuet oi mportf orei gngoodsona l ongt er m basi s,t heni tneedst okeepearni ngsuffici entf or ei gnexchanget ofinancesuch i mport s.I fnot ,t hecur r entaccountwoul dbei ndefici tandi mport swoul dhavet obe financedbyborr owi ngf or ei gnexc hange.Manydev el opi ngcount r i esf acet hedi l emmaof l argecurr entaccountdefici t soverext endedperi odsoft i me.Thi st ypi cal l yl eadst hem t o dependoni nt ernat i onall endi ngi nst i t ut i onssuchast heI nt ernat i onalMonet aryFundf or assi st ancet ofinancesuchdefici t s.Suchborr owi ng,howeve r ,i susual l yaccompani edby seve r eeconomi ccondi t i onal i t yorst ri ctmeasur essuchasmaj orcut backsongover nment spendi ngwhi chaggr avat epover t y . CAUSESOF A CURRENT ACCOUNT DEFI CI T
Thecur r entaccountdefici toccur swheni mpor t sofgoodsandser vi ces,i nv est me nt i ncomeout flowsandout wardt r ansf er sexceedt heexport sofgoods,ser vi ces,i nves t ment i ncomei nflowsandi nwar dt r ansf er s.Someoft hecausesofacur r entaccountdefici tar e: 1.
Low Compet i venes s.I facount ry’ smanuf act uri ngandservi cei ndust ri esl ack
compet i t i veness,t heni twoul dexperi encedi fficul t yi nsel l i ngi t spr oduct si nf orei gn mar ket s.Assuch,i t sl evelofexport swoul dbel ow.I naddi t i on,t hel ackof compet i ve nessont hepartofdomes t i ci ndust r i eswoul dencour ageconsumer st o pur chasepr oduct sf r om mor eeffici entf or ei gnpr oducer s.Thi swoul dl eadt oahi gh l eve lofi mport s,whi chcombi nedwi t hl ow export swoul dr esul ti nacur r ent accountdefici t . Domest i ci ndust r i esmayl ackcompet i venessi fneededr esour cesar esi mpl y unavai l abl e.I tmayal soari sei fsmal lscal epr oduct i oni sempl oyedwhi chpr event s t heatt ai nmentofeconomi esofscal e.Eveni ft herei sl ar gescal epr oduct i on,t he empl oymentofobsol et et echnol ogymayal sor esul ti nhi ghcost sandhencel ow compet i t i veness.Fi nal l y,hi ghdomest i ci nflat i on coul dal sol eadt oanerosi on of domest i ccompet i t i veness. uedexchanger at e.I 2. Anoverval ft heexchangerat ei ssetatal evelwhi chmakes i mport scheapr el at i vet odomest i cal l ypr oducedgoodsandservi ces,t heni mport s woul dr i se.Fur t her mor e,anover val uedexchanger at ewoul dal somakeexpor t abl e goodsseem expensi vet of ore i gner swhi chwoul dl eadt oadecl i nei nexport s.Bot h oft hesecombi nedwoul dr esul ti nacur r entaccountdefici t .
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3.
Rapi dgr owt hi ni ncome.Asi ncomei ncr eases,consumpt i onr i sesandass uch
t hel evelofi mport si ncr eases. I fexport sr emai nunchanged,t henari sei ni ncome woul dr esul ti nar i sei ni mpor t sandhenceadefici ti nt hecur r entaccount . 4.
Hugec api t ali nflows.I facount rybenefit sf r om l argecapi t ali nflowswhi chr esul t
i nasurpl usi nt hecapi t alaccount ,i ti sl i kel ythatt hecurr entaccounti nf ut ur e year swoul dbenegat i vel yi mpact ed.Thi si sbecausef or ei gni nv est me nt sgener at e i nves t menti ncomet ot hef or ei gni nves t orswhi chareout flowsi nt hecurr ent account. PROBLEMSWI TH ACURRENTACCOUNTDEFI CI T
Adefici tr epr esent sanetwi t hdr awalf r om t heci r cul arflow ofi ncomebyt hef or ei gnt r ade sect or .Assuch,aggr egat eexpendi t ur ewi t hi nt hedomest i ceconomyf al l s,l eadi ngt oa decl i nei ni ncomevi athemul t i pl i erpr ocess.Thi smayal soresul ti nt hecr eat i on ofa deflat i onarygapwher ecycl i calunempl oymentexi st s.I naddi t i on,acur r entaccount defici tcausedbyhugei mport at i oni susual l yfinancedbyborr owi ngf r om over seas.Thi s gi vesri set osi gni ficanti nt erestpayment swhi chl eadst oanexacerbat i ngi ft hedefici t . Suchi nt er es tpayment smayal sobeabur denonGNPsi ncei ti sanout flow ofne t proper t yi ncomef r om abr oad. MEASURES USED TO ELI MI NATE A CURRENT ACCOUNT DEFI CI T
Ther ear eahostofdi ffer entmeasur eswhi chagov er nmentcanuset oel i mi nat eacur r ent accountdefici t .Thesei ncl ude: 1.Expendi t ur eReduci ngMeas ur es 2.Expendi t ur eSwi t chi ngMeasur es 3.ExportSubsi di es 4.Enhance dCompet i t i venes s 1. Expendi t ur eReduci ngMeasur es :
Thesear edeflat i onar yorcont r act i onar yme asur est hatdecr easenat i onali ncome . Thi si sbecausei mpor t sar esai dt obei nduced,i . e. ,r i seasi ncomei ncr easesand l i kewi sef al lasi ncomedecr eases. Export sont heot herhandaresai dt obe aut onomoust ot hel eve lofnat i onali ncome.Hence,asi ncomedecr eases,i mport s f al lwhi l eexport sr emai nunchangedcausi ngt hedefici tt obeel i mi nat ed.Thi si s shownbyamove mental ongt hei mportf unct i oni nt hedi agr am ( Fi gur e1)f r om poi ntAt opoi ntB.Asaresul toft hedecreasei nt hel evelofi mport s,t hecurr ent accounti mpr oves,possi bl yresul t i ngi nanoveral lbal ance.
15
Figure 1: Contractionary Policy and the Current Account Balance
2.Expendi t ur eSwi t chi ngMeasur es :
Thi si ncl udesal lme asur esdesi gnedt oswi t chexpendi t ur eawayf r om i mpor t sand t owar dsdomes t i cal l ypr oducedgoods,suchas: •
Deval uat i on ordepr eci at i on oft heexchangerat e.Thi swi l lbedi scussedi n
moredetai li nt het opi c:ExchangeRat e.Adeval uat i on appl i esi ft her ei safixed exchangerat e,whi l eadepr eci at i on occur si ft herei safloat i ngexchangerat e r egi me.Bot hmeasur esr esul ti nani ncr easei nt hepri ceoff orei gncurr enci es andbyext ensi on,i mport sbec omemor eexpensi veanddomes t i cexport s becomecheaperi nf or ei gnmar ket s.Assumi ngt hatt hedemandf ori mpor t si s el ast i c,t henover al l ,asi mport sbecomemoreexpensi ve,expendi t ur eoni mport s woul df al l ,l eadi ngt oadecl i nei nout flowsi nt hecur r entaccount .I ft he demandf orexport si sel ast i c,asi tbecomescheap,exportr evenueswoul dri se, l eadi ngt oani ncr easei ni nflowsi nt hecur r entaccount . Bot hoft heseeffect sr ei nf orceeachot herasameansofel i mi nat i ngt hedefici t i nt hec ur r entaccount .Ther equi r ementt hatt hedemandf ori mport sand export sareel ast i ci sknownast heMar shal l Lernercondi t i on.I ft hi scondi t i on doesnothol d,t hent hedeval uat i onordepr eci at i on woul dnothel pt oel i mi nat e t hecur r entaccountdefici t . •
I nt roducti onofprot ecti oni stpol i ci es.Thi sopt i on el i mi nat esacurr ent
accountdefici tbycurt ai l i ngt heamountofi mport svi at hei mpl ement at i onof pol i cymeasur eswhi chseekt oprot ectt hehomemar ketf r om i mport ed pr oduct s. •
Subsi di zi ngi mportsubst i t ut es. Thi sopt i onr equi r esal l ocat i onsofsubsi di es
di rect edatl ocalproduct i on,wi t ht heobj ect i veofl oweri ngcostofproduct i on i mportsubst i t ut es.Thi si sseent obenecessary ,ast hel ower edcostof
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domes t i cout putwoul dencour agec onsumer st opur chasesuchpr oduct sas opposedt of or ei gnmanuf act ur edgoods.
3.
ExportSubsi di es:
Anexpor tsubsi dyi sapaymentt oadome st i cpr oducerwhoexpor t sagoodabr oad. Thi scanal sobeusedi ndependent l yori nconj unct i onwi t hot herpol i ci esf ort he purposeofel i mi nat i ngacurr entaccountdefici t .Becauseoft hesubsi di zi ngof domest i cexport s,pr oducer sareabl et ore ducepr oduct i oncostwhi chi mpr ovest he compet i t i venessoft hei rout puti nt hei nt ernat i onalmar ket s.Thi sshoul dther ef ore servet oboostexportearni ngsandt her ebyel i mi nat et hecurr entaccountdefici t . Thefir stt wome asur es,expendi t ur er educi ngandexpendi t ur eswi t chi ng,mayber egar ded ascompl ement sr at hert hancompet i ngmeasur es.Thi si sbecauset hegov er nmentmi ght i ni t i al l yundert akeexpendi t ur ereduci ngpol i ci esi nordert ocreat espar ecapaci t yi nt he economy .Af t erwards,i twoul di mpl ementexpendi t ur eswi t chi ngpol i ci eswhi chwoul d di ver tdemandawayf r om i mport st odomest i cout put .Si ncet her ei sspar ecapaci t yi nt he economy ,domes t i cfir mswoul dbeabl et oi ncr easeout putandmee tt hei ncr easei n domest i cdemand. CURRENTACCOUNTSURPLUSES
I fonecount ryhasacurr entaccountsurpl us,t heni t st r adi ngpart nerwoul di nevi t abl y haveacurr entdefici t .Chi nacurr ent l yhast hel argestcurr entaccountsurpl usi nt he wor l dandi t smai nt r adi ngpar t ner ,t heUSA,hast hel ar gestdefici ti nt hewor l d.Asa r esul t ,curr entaccountsurpl usescanr esul ti nr et al i at i on wher et hedefici tcount rycut s backoni mpor t at i onpossi bl yl eadi ngt oadefici ti nt hesur pl uscount r y .I fbot hcount r i es hadnei t herdefici t snorsur pl usest hennosuchf eedbackeffect swoul doccur . METHODS OF ELI MI NATI NG A CURRENT ACCOUNT SURPLUS
1.
Reval uat i on orappr eci at i on oft heexchangerat e.Thi sr ef erst oani ncreasei n
t heexc hanger at eundert hefixedexc hanger at eandfloat i ngexc hanger at e r espect i vel y .Thi spol i cyact i onmakesi mport sappearc heapert odomest i c consumer sandexport smor eexpensi vet of ore i gner sast heext er nalval ueoft he count ry’ scurr encyi ncr eases.Asaconsequence,t heval ueofi mport sr i seswhi l e t heval ueofexport sdecl i nest husel i mi nat i ngt hesurpl us. 2.
emovalofpr ot ect i oni stpol i cywoul d Removepro t ect i oni stmeasures.Ther encour agei ncr easedi mport at i onandt husel i mi nat et hesur pl usbyal l owi ng i mport st oi ncr ease.
3.
Expansi onarypol i cy.Anyi ncr easei ndomes t i ci ncomebr oughtaboutby
expansi onarypol i cywoul dl eadt oari sei ni mport swi t hnochangei nt hel evelof
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export s.Asaconsequence,out flowsi nt hecur r entaccountr i se,wi t hi nflowshel d const ant .Event ual l yt hi sl eadst oanel i mi nat i onoft hesurpl us.Thi si sshowni n Fi gur e2wher et hel evelofexporti sconst antat$40mi l l i on.I fi ncomei satY R i mport sare$10mi l l i onandt her ei sasur pl usof$30mi l l i on.Asi ncomei ncr eases f r om YR t oYS t her ei sanexpansi oni ni mpor t sasshownbyt hemov emental ongt he i mportschedul ef r om R t oS.Asar esul ti mport sr i set o$40mi l l i onandt he curr entaccountsurpl usi sel i mi nat ed.
Expansionary Policy and the Current Account Balance
GLOSSARY OF FREQUENTLY USED TERMS
Bal anceofPayment sManual :Thi si st hest andar di ssuedbyt heI nt ernat i onal
Monet aryFund( I MF) ,whi chpr ovi desgui dancet omembercount r i esi nt hecompi l at i onof bal anceofpayme nt sst at i st i cs. Tr ansact i on:At r ansact i oni saneconomi cflow bet weenr esi dent sandnonr esi dent s.
Tr ansact i onsi nvol v echangesi nowner shi pofgoodsandfinanci alasse t s/l i abi l i t i es,t he pr ovi si on ofservi ces,l abourandcapi t alandt r ansf er si ncash andki nd. Compensat i onofEmpl oye es:Thi si si ncomerecei vedasr emuner at i onf orwork.I t
i ncl udeswagesandsal ari espai dt oempl oyee s,commi ssi ons,bonuses ,payment si nki nd andi ncent i vepayment si nagi vent i meper i od. Di rectI nvest or:Thedi r ecti nvest ormaybeani ndi vi dual ;an i ncorporat edor
uni ncorporat edpri vat eorpubl i cent erpri seoranyot heror gani zat i ont hatownsdi r ect i nves t mentent er pri sesi naneconomyot hert han t heonei nwhi cht hedi r ecti nves t or resides.
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Di r ectI nvest mentEnt erpri se:ADi r ectI nvest mentEnt erpri sei sani ncorporat edor
uni ncorpor at edcompanyi nwhi chadi r ecti nves t oracqui r es10percentormor eofi t s ordi narysharesorvot i ngpower .MostDi r ecti nvest mentent erpri sesareei t herbr anches orsubsi di ari es. ei gnassetsr ef ert oacount ry' scl ai m on f or ei gners. Forei gn Asse t s:For For e i gnLi abi l i t i e s:For e i g nl i abi l i t i e sr e f e rt oac ount r y ' si nde bt e dne sst of or e i g ne r s . Tr adeCr edi t s:Thi si scr edi tt hatonenonfinanci alfir m ext endst oanot herf orgoodsand
servi cest r ansact i ons. Equi t y:Theval ueoft heor di naryshar esi ssuedbyacompany . Monet aryPol i cy:Mo net arypol i cydescri best heuseofvari at i onsi nt hequant i t yof
moneywhi chmayrai seorl oweri nt er estr at es,andhenceei t herdi r ect l yori ndi r ect l y l owerorr ai seaggr egat edemand. Fi s c alPol i c y:Fi scalpol i cydescri best heuseoft axat i on andexpendi t ur ebyt he
governmentt oi nfluencet hel evelofbusi nessact i vi t y.
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