...Balance of Trade and Balance of Payment with a special reference of Bangladesh Introduction Bangladesh is one of the fastest growing economic countries among the LDC’s country. According to the International Monetary Fund, Bangladesh ranked as the 42rd largest economy in the world in 2011 in PPP terms and 57th largest in nominal terms, among the Next Eleven or N-11 of Goldman Sachs and D-8 economies, with a gross domestic product of US$269.3 billion in PPP terms and US$104.9 billion in nominal terms. The economy has grown at the rate of 6-7% per annum over the past few years. More than half of the GDP is generated by the service sector; while nearly half of Bangladeshis are employed in the agriculture sector. Other goods produced are textiles, jute, fish, vegetables, fruit, leather and leath An easy way to understand any country's economic scenario is through its Balance of Trade (BOT) and Balance of Payment (BOP) figures. Balance of Trade shows the difference between the total amount of incoming and outgoing currencies through import and export. Balance of Payment (BOP) is a summary of economic activities between the residents of a country and the rest of the world during a given period, usually one year. The main purpose of keeping these records is to inform government authorities about the overall international economic position of the country in order to assist them in arriving at decisions on monetary and fiscal policy, on the one hand, and trade and payments policy...
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...DEFINITION OF 'BALANCE OF PAYMENTS (BOP)' A statement that summarizes an economy’s transactions with the rest of the world for a specified time period. The balance of payments, also known as balance of international payments, encompasses all transactions between a country’s residents and its nonresidents involving goods, services and income; financial claims on and liabilities to the rest of the world; and transfers such as gifts. The balance of payments classifies these transactions in two accounts – the current account and the capital account. The current account includes transactions in goods, services, investment income and current transfers, while the capital account mainly includes transactions in financial instruments. An economy’s balance of payments transactions and international investment position (IIP) together constitute its set of international accounts. Ads * Reliance Life Insurance reliancelife.com/Insurance_Premium 1Cr Cover @ Rs450 or 50 Lac @ Rs253 Per month, Policy Term up to 35 yrs * Chennai Office Space regus.co.in/Chennai_Office_Space Flexible Office to Suit Your Needs. in Prime Locations+IT+Receptionist. INVESTOPEDIA EXPLAINS 'BALANCE OF PAYMENTS (BOP)' Despite its name, the “balance of payments” data is not concerned with actual payments made and received by an economy, but rather with transactions. Since many international transactions included in the balance of payments do not involve the payment of money, this figure may differ significantly...
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...BRAC UNIVERSITY Assignment Topic Balance of Trade and Balance of Payment with special reference of Bangladesh Submitted to Dr. Shah Ahsan Habib Prepared by: Student Name: Marshal Richard Student ID# 10364057 Program: MBA Course: BUS 510: International Business Date of Submission: 22 April 2012 Bus 510: International Business Introduction Bangladesh is one of the fastest growing economic countries among the LDC’s country. According to the International Monetary Fund, Bangladesh ranked as the 42rd largest economy in the world in 2011 in PPP terms and 57th largest in nominal terms, among the Next Eleven or N-11 of Goldman Sachs and D-8 economies, with a gross domestic product of US$269.3 billion in PPP terms and US$104.9 billion in nominal terms. The economy has grown at the rate of 6-7% per annum over the past few years. More than half of the GDP is generated by the service sector; while nearly half of Bangladeshis are employed in the agriculture sector. Other goods produced are textiles, jute, fish, vegetables, fruit, leather and leath. An easy way to understand any country's economic scenario is through its Balance of Trade (BOT) and Balance of Payment (BOP) figures. Balance of Trade shows the difference between the total amount of incoming and outgoing currencies through import and export. Balance of Payment (BOP) is a summary of economic activities between the residents of a country and the rest of the world during a given period, usually one year. The...
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...technology, and management resources that would otherwise not be available and thus boost that country’s economic growth rate. • Employment Effects: FDI brings jobs to a host country that would otherwise not be created there. It may be direct and indirect. When a foreign multinational enterprise employs a number of host-country citizens, direct effects arise. On the other hand, when jobs are created in local suppliers as a result of investment and when jobs are created because of increased local spending by employees of the multinational enterprise, direct effects arise. • Balance-of Payments Effects: A country’s balance-of-payments accounts track both its payments to and its receipts from other countries. Governments normally are concerned when their country is running a deficit on the current account of their balance of payments. The current account tracks the export and import of the goods and services. So governments prefer surplus rather than deficit. There are two ways in which FDI can help a country to see a current account surplus. The first one is if the FDI is a substitute for imports of goods and services, the effect can be to improve the current account of the host country’s balance of payments. The second potential benefits arise when the multinational enterprise uses a foreign subsidiary to export goods and services to other countries. • Effect on Competition and Economic Growth: When FDI takes the form of a Greenfield investment, the result is to establish a new enterprise...
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...Impact Assessment of Balance of payments imbalance caused due to crude oil import. A Thesis Submitted to Lahore School of Economics By Name: M. Daniyal Kamran Section B 07u0391 For Award of Degree of Bachelors of Business Administration(Honors) in (Majors) Finance (Minors) in Maths, Stats and Social Sciences Session: 2007 to 2011 Declaration This thesis contains no material, which has been accepted for the reward to the candidate of any other degree or diploma, in any university or other institution. To the best of my knowledge the thesis contains no material previously published or written by another person, except where due reference is made in the text of the thesis. ___M. Daniyal Kamran____ Name RESEARCH COMPLETION CERTIFICATE Certified that M. Daniyal Kamran, id No. 07u0391 Session 2007 to 2011 has carried out and completed the research project entitled “ Thesis title” under my supervision for requirement for the award of Degree of Bachelor of business Administration Honors (Majors) by Lahore School of Economics. Research supervisor (Zehra Raza) ...
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...Introduction to Balance of payments The Balance of Payments (BOP) is a measure of all the financial transactions flowing between one country and all other countries during a specific period, usually a quarter or a year. It is also the name of the official record of these transactions. A positive, or favorable, balance of payments is one in which more payments have come in to a country than have gone out. A negative or unfavorable balance means more payments are going out than coming in. The BOP is a major indicator of a country's status in international trade, and a reflection of its economic well-being or vulnerability. The balance of trade is one component of the balance of payments. It is also a sign of the productiveness of a people and a reflection of whether they are primarily producers or consumers. Producing nations grow while consuming nations eventually deplete their resources and collapse as fewer people are able to access them. IMF Definition The IMF definition: "Balance of Payments is a statistical statement that summarizes transactions between residents and nonresidents during a period. The balance of payments comprises the current account, the capital account, and the financial account. "Together, these accounts balance in the sense that the sum of the entries is conceptually zero." The current account consists of the goods and services account, the primary income account and the secondary income account. The financial account records transactions that...
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...| | | SCHOOL OF BUSINES Project on: Balance of Payments Prepared By: Hassan ajami, Mansour daher, reda younes,ali Mohsen, Mohammad kanso Submitted To: Dr. habib awada Course BFIN 430 (International Banking & Finance). Spring 2013-2014 TABLE OF CONTENTS 1- INTRODUCING THE BOP CONCEPT: 1.1) Brief History 5 1.2) Basic Definition 5 1.3) System of Recording 7 1.3.1) Identifying Transactions 7 1.3.2) The Debit & Credit System 9 2- GENERAL STRUCTURE OF THE BOP: 2.1) Main Components 12 2.1.1) Current Account 12 2.1.2) Trade Balance 15 2.1.3) Capital Account 16 2.1.4) Financial Account 18 2.1.5) Errors & Omissions 22 2.2) Complications 23 2.2.1) Accounts Interrelation 23 2.2.2) Deficit & Surplus Dilemmas 25 3- BOP FROM EQUILIBRIUM TO DISEQUILIBRIUM 3.1) BOP in Equilibrium 27 3.1.1) Equilibrium Conditions 27 3.1.2) Equilibrium Model 27 3.1.3) Types of Equilibrium 29 3.2) BOP in Disequilibrium 29 3.2.1) Causes of Disequilibrium 29 3.2.2) Types of Disequilibrium 32 3.2.3) Consequences of Disequilibrium 33 3.2.4) Measures to Eliminate Disequilibrium 33 3.2.5) Demonstrating Disequilibrium 35 4- STUDYING THE LEBANESE BOP 4.1) Historical Events: 1999 and before 37 4.2) Major Events of the Decade: 2000-2008 38 4.3) Recent Events: 2009-2010 40 5- CONCLUSION Importance of BOP 44 1- INTRODUCING...
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...Various macroeconomic factors that influence the business are: a. Economic Growth Economic activities refer to the level of buying and selling activities happening in an economy over a time period. It is a highly complex activity and keeping accurate track of it is beyond comprehension. Economic activity is not constant and can change rapidly, thereby affecting the business. Economic activity changes could happen due to the following reasons: Changes in income levels Future prospects of individuals. Future of the economy The level of economic activity in the world as a whole Political activity around the world Natural disasters - like hurricanes, earthquakes, or flood etc. Changes in prices of raw materials - oil, metals, fuel, energy and so on Changes in world stock markets The level of economic activity is usually measured by GDP (Gross Domestic product). It refers to the total amount of goods and services a country produces. Businesses are greatly influenced by the economic activities. When GDP rate falls or slows down, there will be a fall in demand for good or services offered by businesses. As a result, businesses will witness a fall in revenues and profit margins. To curb this business will have to reduce their prices to increase the sales. This could further lead to increase in unemployment. On the other hand, when there is an increase in GDP, the demand for products will automatically increase and hence the prices will go up. To cope...
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...1. What is the investment income account of the balance of payments? Investment income account includes: a. Direct foreign investment (Investment in fixed assets in foreign countries that can be used to conduct business operations to earn revenue.) b. Portfolio investment (Investment in long-term financial assets like stocks and bonds to earn dividends or interests between countries that do not affect the transfer of control.) c. Other capital investment (Investment in short-term financial assets like money market securities between countries to earn interests.) 2. What is the official settlements account of the balance of payments? How are official settlements deficits and surpluses associated with movements in the international reserves of the balance of payments? Official settlement account is the sum of the current account, the capital account, the non-reserve financial account, and the statistical discrepancy. Official settlements offset international reserves. Official settlements surplus increase official reserve assets. Official settlements deficits decrease official reserve assets. 3. Explain why private national saving plus government saving equals the current account of the balance of payments. a. National income on expenditure = C+I+G+X-M b. National income on disposal = C+S+T c. Because expenditure = disposal, therefore C+I+G+X-M=C+S+T d. We can see X-M=(S-I)+(T-G) e. So Current asset equals to private national saving...
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...Balance of payments The Balance of Payments is a record of a country’s transactions with the rest of the world. It shows the receipts from trade. It consists of the current and financial account 1. Current account This is a record of all payments for trade in goods and services plus income flow it is divided into four parts. * Balance of trade in goods (visibles) * Balance of trade in services (invisibles) e.g. tourism, insurance * Net income flows (wages and investment income) * Net current transfers (e.g. govt aid) 2. Financial account This is a record of all transactions for financial investment. It includes: * Net investment from abroad (e.g. A UK firm buying a factory in Japan would be a debit item) * Net financial flows – These are mainly short term monetary flows such as “hot money flows” to take advantage of exchange rate changes * Reserves * (note the Financial Account used to be called the Capital Account) 3. Capital Account This refers to the transfer of funds associated with buying fixed assets such as land * Balancing Item In practice when the statistics are compiled there are likely to be errors therefore the balancing item allows for these statistical discrepancies. Balance of Payments equilibrium * In a floating exchange rate the supply of currency will always equal the demand for currency, and the balance of payments is zero. * Therefore if there is a deficit on the current account...
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...considering expansion to India or Brazil A service organization considering expansion to Thailand or Ghana A nonprofit organization considering expansion to China or Hungary Obtain faculty approval of your scenario prior to beginning the assignment. Prepare a 1,750- to 2,450-word paper in which you relate the international flow of goods, services, and capital to the balance of payments and domestic economic behavior. Address the following: Analyzetrends of balance of payments accounts, including the current and capital accounts, and the overall balance of payments over a 3-5 year period on a quarterly basis for the countries in your scenario. Relatevarious balance of payments accounts to fluctuations of the exchange rates of the proposed countries over the time period. Describecurrent economic conditions of the countries. Use the Internet to research balance of payments data. Use the following resources to research data related to the international flow of goods, services, and capital, and international economic and political conditions: U.S. Department of Commerce Bureau of Economic Analysis Economic Research Federal Reserve Bank of St. Louis International Trade Administration World Bank Group U.S. Census Bureau International Monetary Fund U.S. Commercial Service Format your paper consistent with APA guidelines. Include a minimum of five cited references in the body of the paper For more Assignments visit:...
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...International Economics, 9e (Krugman et al.) Chapter 1 Introduction 1.1 What Is International Economics About? 1) Historians of economic thought often describe ________ written by ________ and published in ________ as the first real exposition of an economic model. A) "Of the Balance of Trade," David Hume, 1776 B) "Wealth of Nations," David Hume, 1758 C) "Wealth of Nations," Adam Smith, 1758 D) "Wealth of Nations," Adam Smith, 1776 E) "Of the Balance of Trade," David Hume, 1758 Answer: E Page Ref: 1 Difficulty: Easy Question Status: New 2) From 1960 to 2009, A) the U.S. economy roughly tripled in size. B) U.S. imports roughly tripled in size. C) the share of US Trade in the economy roughly tripled in size. D) U.S. Imports roughly tripled as compared to U.S. exports. E) U.S. exports roughly tripled in size. Answer: C Page Ref: 1 Difficulty: Easy Question Status: New AACSB Codes: Dynamics of the Global Economy 3) The United States is less dependent on trade than most other countries because A) the United States is a relatively large country with diverse resources. B) the United States is a "Superpower." C) the military power of the United States makes it less dependent on anything. D) the United States invests in many other countries. E) many countries invest in the United States. Answer: A Page Ref: 2 Difficulty: Easy Question Status: New AACSB Codes: Dynamics of the Global Economy 4) Ancient theories of international...
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...eachforeign country equal to its share in trade. Depending on the purpose for which it is used, it can be export-weighted, import-weighted, or total-external trade weighted. The trade-weighted effective exchange rate index is an economic indicator for comparing the exchange rate of a country against those of their major trading partners. By design, movements in the currencies of those trading partners with a greater share in an economy's exports and imports will have a greater effect on the effective exchange rate. In a multilateral, highly globalized, world, the effective exchange rate index is much more useful than a bilateral exchange rate, such as that between the Australian dollar and the United States dollar, for assessing changes in the competitiveness due to exchange rate movements. The invisible balance or balance of trade on services is that part of the balance of trade that refers to services and other products that do not result in the transfer of physical objects. Examples include consulting services, shipping services, tourism, and patent license revenues. This figure is usually generated by tertiary industry. The term 'invisible balance' is especially common in the United Kingdom. For countries that rely on service exports or on tourism, the invisible balance is particularly important. For instance the United Kingdom and Saudi Arabia receive significant international income from financial services, while Japan and Germany rely more on exports of manufactured goods. In...
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...Q1: Balance of payment: When a country trade with another countries, there are records of all that transaction known as payment of balance, the benefit of having such a record is to know how much money is spent on import and export in goods and services. BOP consist in: 1- Capital account: monitoring of the short term and long term transaction among the UK and the whole world in (saving and investment) with a surplus of 100 million in 2012 and it contains: * Direct investment: when an invest take a place outside the country (abroad) the record of transfer of ownership it’s called a direct investment with amount of 48.3 billion in 2012. * Portfolio investment: it’s all the investing in shares and bonds, and all the interest a dividends received from it concern to be in/out flow to the country, which it increased to 118.8 in 2012. * Other investment: includes net government borrowing from foreigners, and short-term. * Official reserve: the government used of gold and currencies held by the bank 2- Current account: keeping a record of all transaction in goods and services in and out of UK called current account which it’s was a deficit with over 59.8 billion in 2012. Which includes: * Trade in goods: in the oil section for in 2012 UK has been a net exporter for it. However, UK always import goods then it export which made it a trade deficit of 12.56 (-) billion in 2012. * Trade in services: it’s what the country provide for their people...
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...Balance of Trade shows the difference between the total amount of incoming and outgoing currencies through import and export. Balance of Payment (BOP) is a summary of economic activities between the residents of country and the rest of the world during a given period, usually one year. The main purpose of keeping these records is to inform government authorities about the overall international economic position of the country in order to assist them in arriving at decisions on monetary and fiscal policy, on the one hand, and trade and payments policy on the other. Balance of payments statistics are therefore helpful to government authorities charged with maintaining macroeconomic stability.BOT is a part of BOP, but it is significant for the economy because import and export is one of the most important economic activities of a nation. Moreover the balance of trade shows whether the external sector of a particular country is doing well or not. Along with BOT,BOP depicts the overall economic balance of a nation and the health of foreign reserve of that nation. So I agree that in the context of Bangladesh balance of trade is an external sector indicator than balance of payments. A common misconception is that balance of trade deficits are always bad for the economy. This is not necessarily true. In the short term if a country is importing a high volume of goods and services this acts as a short-term boost to living standards since it allows consumers to buy a higher level of household...
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