International-Financial-Management---Bekaert-2e---Solutions---Ch04.doc
《International-Financial-Management---Bekaert-2e---Solutions---Ch04.doc》由会员分享,可在线阅读,更多相关《International-Financial-Management---Bekaert-2e---Solutions---Ch04.doc(10页珍藏版)》请在冰豆网上搜索。
![International-Financial-Management---Bekaert-2e---Solutions---Ch04.doc](https://file1.bdocx.com/fileroot1/2022-10/4/481edb7e-5cf6-45ed-b258-0cc4e214c448/481edb7e-5cf6-45ed-b258-0cc4e214c4481.gif)
Chapter4:
TheBalanceofPayments9
Chapter 4
TheBalanceofPayments
QUESTIONS
1.Whatarethemajoraccountsofthebalanceofpayments,andwhattransactionsarerecordedoneachaccount?
Answer:
Thethreemajoraccountofthebalanceofpaymentsarethecurrentaccount,thecapitalaccount,andtheofficialsettlementsaccount.
Thecurrentaccountrecordsthefollowing:
1.Imports,whicharepurchasesofgoodsandservicesfromforeignresidents,andexports,whicharesalesofgoodsandservicestoforeignresidents.
2.Transactionsassociatedwiththeincomeflowsfromtheownershipofforeignassets(dividendsandinterestpaidtodomesticresidentswhoownforeignassetsaswellasdividendsandinterestpaidtoforeignresidentswhoowndomesticassets).
3.Unilateraltransfersofmoneybetweencountries(foreignaid,gifts,andgrantsgivenbytheresidentsorgovernmentsofonecountrytothoseofanother).
Thecapitalaccountrecordsthefollowing:
Purchasesandsalesofforeignassetsbydomesticresidentsaswellasthepurchasesandsalesofdomesticassetsbyforeignresidents.
Thedefinitionofanassetisallinclusive:
Itisanyforminwhichwealthcanbeheld.Itencompassesbothfinancialassets(bankdepositsandloans,corporateandgovernmentbonds,andequities)andrealassets(factories,realestate,antiques,andsoforth).Hence,thecapitalaccountrecordsallchangesinthedomesticownershipoftheassetsofothernationsaswellaschangesintheforeignownershipoftheassetsofthedomesticcountry.
Theofficialsettlementsaccountrecordsthefollowing:
Transactionsinvolvingthepurchaseorsaleofofficialinternationalreserveassetsbyanation’scentralbank.
Internationalreservesaretheassetsofthecentralbankthatarenotdenominatedinthedomesticcurrency.Goldandassetsdenominatedinforeigncurrencyarethetypicalinternationalreserves.
2.Whyisitimportantforaninternationalmanagertounderstandthebalanceofpayments?
Answer:
Thebalanceofpaymentsprovidesinformationthatisusefulinunderstandingthedeterminationofexchangeratesandthegrowthprospectsofacountry.Forexample,persistent,largecurrentaccountdeficits,especiallyonesthatareprimarilyconsumerdriven,areoftenassociatedwithcurrencycrisesinwhichthecurrencyofthecountrywiththedeficitdepreciatessubstantiallyandthecountrysuffersasevererecession.Knowledgeoftheofficialsettlementsaccountindicateswhetherthecountryisgainingorlosinginternationalreserves,andsufficientlossesofreservesindicatealossoftheabilitytomaintainafixedexchangerate.Massiveincreasesininternationalreservesindicatethatthecentralbankisresistingpressureforthecurrencytoappreciateinvalue.Largecapitalaccountsurplusesthatareprimarilydrivenbyprivatesectorinvestmentsindicatethatforeignersfindtheassetsofthecountrytobeattractiveinvestmentopportunities.
3.Whataretherulesthatdeterminetheresidencyrequirementsonthebalanceofpayments?
Answer:
Therulesforresidencyarethattheentityhasaprimaryeconomicinterestinthecountry.Thus,itisnotcitizenshipthatisbeingmeasured.TheseconceptsarediscussedindetailintheIMF’sBalanceofPaymentsmanualavailableonlineat
http:
//www.imf.org/external/np/sta/bop/BOPman.pdf.
4.Whichitemsonthebalanceofpaymentsarerecordedascredits,andwhichitemsarerecordedasdebits?
Why?
Answer:
Thebalanceofpaymentsusesadouble-entrysystem.Eachtransactiongivesrisetotwoentries:
Oneentryisacredit,andtheotherentryisadebitofequalvalue.AnytransactionresultinginapaymenttoforeignersisenteredintheBOPaccountsasadebit.Anytransactionresultinginareceiptoffundsfromforeignersisenteredasacredit.Inthedoubleentrysystem,theflowofmoneyfromadomesticresidenttoaforeignresidentisacreditandtheitemthatgivesrisetotheflow(eitheranimportofagoodorserviceorthepurchaseofaforeignasset)isadebit.
5.Howaregiftsandgrantshandledinthebalanceofpayments?
Answer:
Giftsandgrantsarehandledasimportsandexportsofgoodwill.Ifadomesticresidentgivesagifttoaforeignresident,thevalueofthegiftisadebit(animportofgoodwill)andthevalueofthegiftisacreditonthedomesticbalanceofpaymentsbecauseitresultsinpaymentoffundstoforeigners.
6.Whatdoesitmeanforacountrytoexperienceacapitalinflow?
Isthisassociatedwithasurplusoradeficitonthecountry’scapitalaccount?
Answer:
Whenacountryexperiencesacapitalinflow,foreignresidentsareinvestingindomesticassetsanddomesticresidentsaresellingforeignassets.Thesetransactionsarecreditsonthebalanceofpaymentsbecausethecountryiseffectivelyexportingassets.Ifcapitalinflowsexceedcapit